Why Corporate Gifting Needs a Rethink

As the festive season rolls in, many business owners reach for the company card to reward their teams or thank loyal clients. But here’s the kicker — HMRC doesn’t view generosity the same way you do. Without a plan, your corporate gifting can quickly turn into a costly mistake on your next tax return.

At Hawkhurst Accounting, we strip the fluff out of finance. This guide breaks down business tax rules on corporate gifting, trivial benefits, and HMRC allowances in plain English — so you can stay generous, compliant, and smart with your SME tax planning. Reward your people, impress your clients, and keep your finances rock solid (with a rebel spirit, of course).

 

The Rules in Plain English

Trivial Benefits – What Counts and What Doesn’t

A trivial benefit is HMRC’s way of saying “small, non-cash perks that don’t need to be taxed.” But there are rules:

• The cost must be £50 or less per person.
• This limit is measured including VAT if you can’t reclaim it.
• It can’t be cash or a voucher that can be swapped for cash.
• It can’t be provided in recognition of work done or as part of a contract.
• Think bottles of wine, flowers, birthday cakes, or staff lunches.

Employees vs Directors:

• Employees: No overall annual limit. As long as each gift meets the £50 test, you’re good.
• Directors of close companies (typically SMEs where five or fewer shareholders control the business): Capped at £300 per tax year total trivial benefits per director (and family members).

 

Staff Parties and Socials

• HMRC allows £150 per head per year for staff parties.
• Go over it, even by £1, and the whole amount becomes taxable.
• The exemption covers employees and their guests (e.g. partners). The cost is calculated on a per-head basis so a staff member and their partner together count as two people with two allowances (£300 combined).
• VAT on staff entertaining is reclaimable, but only for employees. If clients or suppliers attend, their share must be stripped out.

 

PSA (PAYE Settlement Agreement)

Sometimes you want to give perks or gifts that don’t fit neatly into the trivial benefit or staff entertaining exemptions. A PSA allows the business to settle the tax and NI on behalf of employees.

• It covers things like bigger gifts, one-off treats, or mixed events that don’t qualify for other reliefs.
• Good for morale, but remember: it costs the company extra, since you’re grossing up the tax.
• Use it strategically, not as a blanket solution.

 

Clients and Suppliers

• Branded promotional gifts under £50 (pens, mugs, diaries) are deductible for corporation tax, and VAT is reclaimable if they’re genuine promotional giveaways.
• Unbranded gifts, alcohol, hampers, or entertainment? No tax deduction, no VAT reclaim.
• Rule of thumb: only branded, low-value promotional items pass both the tax and VAT test.

 

Vouchers and Gift Cards

• HMRC is crystal clear: cash or cash-redeemable vouchers never qualify as trivial benefits.
• Broad-use cards (like Visa prepaid or Amazon vouchers) are treated as cash so fully taxable.
• A restricted-use voucher (e.g. only usable at a single retailer) might qualify if it’s under £50 and ticks the trivial benefit rules.
• There is no government scheme that overrides this. Vouchers are always a grey area, so proceed with caution.

 

Where Businesses Go Wrong

• Mixing up trivial benefits with taxable ones — e.g. assuming all gift cards are fine.
• Forgetting the director cap — leaving small companies with surprise tax bills.
• Over-spending on parties — losing the whole exemption.
• Not accounting for partners at parties — miscalculating the total cost per head.
• Trying to reclaim VAT on client entertainment — which HMRC blocks.

 

How to Play It Smart

• Plan ahead: budget gifts with tax rules in mind.
• Stick to £50 trivial benefits for employees; track director totals.
• Use the £150 per head allowance carefully, including partners, and watch the totals.
• Consider a PSA for awkward or higher-value perks.
• Keep client gifting simple: branded, under £50, and promotional.
• Don’t assume vouchers are trivial. Always check first.

 

The Bottom Line

Generosity is good business. It boosts morale, strengthens relationships, and shows appreciation. But without tax-savvy planning, it can turn into an expensive mistake.

At Hawkhurst Accounting, we help SMEs gift wisely, save tax, and stay compliant. No jargon, no dull seminars, just clear advice that saves money.

 

Final Word

Before you splash out this season, ask yourself:
Is this gift tax-smart, or just another donation to HMRC?

👉 Book a call with us today and we’ll make sure your generosity hits the right spot for your people and your bottom line.

 

Bonus: Free Flash Card

🎁 Corporate Gifting Flash Card
We’ve built a one-page cheat sheet that lays out the rules in a clear table:

• Employees vs Directors trivial benefits
• PSA coverage
• Staff parties (including partners)
• Client and supplier gifting rules
• VAT reclaim do’s and don’ts

👉 Email info@hawkhurstaccounting.com for your free gifting flash card

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