Business Gift Deductibility Rules 2025/26
- Deductible for CT only if ALL conditions met: (1) cost ≤ £50 per recipient per year, (2) NOT food, drink, tobacco or vouchers, (3) carries a conspicuous business advertisement.
- Food, drink, tobacco, vouchers: NEVER deductible, regardless of value or advertisement.
- VAT: Input VAT recoverable only if gift is CT-deductible; irrecoverable if disallowed.
- Employee gifts: Use trivial benefits rules — see our Trivial Benefits Calculator.
- After-tax cost (deductible): gift cost × (1 − CT rate).
- After-tax cost (disallowed): full gift cost — no tax relief, no VAT recovery.
Business Gift Tax Calculator
The £50 limit is per recipient per year inclusive of VAT. Employee gifts use different rules — see Trivial Benefits Calculator.
The Three Conditions for Deductible Business Gifts
Business gifts to customers are deductible for UK corporation tax if — and only if — all three conditions are satisfied simultaneously. Failing any one condition means the entire cost is disallowed.
Condition 1: Cost ≤ £50 Per Recipient Per Year
The total cost of all qualifying gifts (excluding food/drink/tobacco/vouchers) to the same recipient in the tax year must not exceed £50. This is a cumulative annual limit per person, not per gift. If a customer receives two branded items during the year costing £30 each, the combined cost is £60 — both gifts are disallowed. Only by keeping the running total at or below £50 does the deduction survive.
The £50 is generally treated as inclusive of VAT for the purposes of the per-recipient calculation, though HMRC guidance should be checked for precision in specific circumstances.
Condition 2: Not Food, Drink, Tobacco or Vouchers
These categories are absolutely excluded. There is no exception based on cost, purpose, or advertisement. A £20 bottle of wine with a branded label is not deductible. A £10 gift voucher to a retailer is not deductible. A hamper containing food is not deductible, even if it also contains non-food branded items. The disallowance for food/drink/tobacco/vouchers is a hard rule with no exceptions.
Condition 3: Carries a Conspicuous Business Advertisement
The gift must carry a conspicuous advertisement for the business. This typically means the company name or logo is clearly and permanently printed, engraved or embossed on the item. A branded pen, USB drive, notepad, or umbrella with a visible logo qualifies. A luxury item purchased from a shop and given as a gift, without any branding, does not qualify — regardless of value or purpose.
The advertisement must be genuinely conspicuous and integral to the item. A removable sticker or swing tag is unlikely to satisfy this condition. The branding must be a permanent feature of the gift itself.
Examples: Deductible vs Disallowed
| Gift | Cost/recipient/year | Deductible? | Reason |
|---|---|---|---|
| Branded pen with company logo | £15 | Yes | Meets all 3 conditions |
| Branded notebook + pen set | £45 | Yes | Under £50, not food, has advertisement |
| Branded pen + notebook + USB (same customer, same year) | £55 combined | No | Combined cost exceeds £50/year for same recipient |
| Bottle of wine (branded label) | £25 | No | Food/drink — always disallowed |
| Gift card / shopping voucher | £30 | No | Voucher — always disallowed |
| Luxury branded gift (no logo, just packaging) | £40 | No | No conspicuous advertisement |
| Branded tote bag with embroidered logo | £35 | Yes | Meets all 3 conditions |
VAT on Business Gifts
The VAT position mirrors the CT position. If a gift qualifies for CT deductibility, the input VAT on the purchase can be recovered. If it is disallowed for CT (food/drink, over £50, no advertisement), the input VAT is also irrecoverable.
There is an additional output VAT rule for gifts to the same person costing more than £50 in a 12-month period (excluding VAT): the company must account for output VAT on the gift as if it had sold it at cost. For qualifying gifts under £50 per recipient per year, this output VAT charge does not arise. Both the input VAT recovery and the output VAT avoidance make it doubly beneficial to keep gifts within qualifying rules.
Employee Gifts: Different Rules Apply
If you are giving gifts to employees rather than to customers or clients, the business gift rules above do not apply. Employee gifts are assessed under the employment benefit in kind and trivial benefits frameworks.
The trivial benefits exemption allows employers to provide small non-cash gifts to employees tax-free, provided each gift costs £50 or less, is not a reward for services, and is not provided under salary sacrifice. There is a separate £300 annual cap for directors and other office holders. Cash gifts to employees are always taxable as earnings.
See our Trivial Benefits Calculator for employee gift calculations.
Frequently Asked Questions
What is the £50 rule for business gifts?
For a gift to a customer or client to be deductible for UK corporation tax, the cost per recipient per year must not exceed £50 (inclusive of VAT). Additionally, the gift must not be food, drink, tobacco or a voucher, and it must carry a conspicuous advertisement for the business. All three conditions must be met simultaneously.
Can I recover VAT on deductible business gifts?
Yes. If a gift meets all three conditions for CT deductibility, you can also recover the input VAT. However, if the gift fails any condition and is therefore disallowed for CT, the input VAT is also irrecoverable.
Do food, drink or wine gifts to clients ever qualify?
No. Gifts of food, drink, tobacco or vouchers are never deductible for corporation tax, regardless of the cost per recipient, whether they carry an advertisement, or any other factors. The disallowance for these categories is absolute.
What does 'conspicuous advertisement' mean?
The gift must carry a conspicuous advertisement for the business — typically the company name, logo, or branding that is clearly visible and a permanent part of the item. A branded pen, notebook or USB drive with a printed logo usually qualifies. A luxury item with a small sticker that can be removed is unlikely to qualify.
Is the £50 limit per recipient or per item?
The £50 limit applies per recipient per tax year, not per item. If you give the same recipient a branded pen in January and a branded notebook in October, the combined cost for both gifts must not exceed £50 for the year. If the total exceeds £50, neither gift qualifies for the deduction.
Are gifts to employees subject to the same £50 rule?
No. Gifts to employees are governed by different rules — primarily the trivial benefits exemption (£50 per benefit, subject to annual limits for directors). The £50 per recipient business gift rule applies to customers, clients and business contacts, not to employees. See our Trivial Benefits Calculator for employee gift rules.
What if I give identical branded gifts to 100 customers — is each gift assessed separately?
Yes. Each recipient's gifts are assessed individually. If you give a £40 branded pen to 100 different customers, each individual gift costs £40 and qualifies. Total spend of £4,000 is allowable. But if you give the same customer gifts worth £60 in a year, neither qualifies for the full year.
Can I give a gift hamper containing food and drink to a client?
No. A hamper containing food and/or drink is disallowed regardless of value or branding. Even if the hamper contains non-food branded items alongside food items, the presence of food or drink triggers the disallowance. HMRC treats the whole gift as food/drink if it contains any prohibited items.
Are promotional gifts at trade shows treated the same?
Yes, broadly the same rules apply. Branded giveaways at trade shows (pens, bags, notepads) that cost £50 or less per recipient, are not food/drink, and carry a conspicuous advertisement are deductible. Higher-value exhibition gifts or food/drink items at launches are subject to the usual disallowance rules.
What is the effective CT cost of a non-deductible gift vs a deductible one?
For a deductible gift, the effective after-tax cost is gift value × (1 − CT rate). At 25% CT, a £40 deductible gift costs £30 net. For a non-deductible gift, the full £40 comes from post-tax profits — no CT saving. The difference is £10 per gift, or £0.25 per £1 spent at the 25% CT rate.
Do I have to account for output VAT on business gifts?
If you give a business gift costing more than £50 (excluding VAT) to the same person in a 12-month period, you must account for output VAT on the gift. For gifts under £50 per person per year, no output VAT needs to be accounted for — and if the gift qualifies for CT, the input VAT is recoverable.
What records should I keep for business gifts?
Keep records showing: the date and description of each gift, the recipient's name and business relationship, the cost (inclusive of VAT), evidence that the gift carries a conspicuous business advertisement, and confirmation it is not food, drink, tobacco or a voucher. Track the running total per recipient per year to ensure the £50 limit is not breached.