UK tax treatment of corporate gifts
Corporate gifts have specific tax treatment under UK law. This article summarises the main rules. It is not tax advice; consult your accountant for your specific situation.
Trivial benefits for employees
HMRC's trivial benefits exemption covers gifts to employees that meet all four conditions:
- The benefit costs £50 or less to provide per employee.
- It is not cash or a cash voucher.
- It is not a reward for services or performance.
- It is not provided under a salary sacrifice arrangement.
If all four conditions are met, the benefit does not need to be reported on a P11D and is not subject to PAYE or National Insurance. The £50 limit applies per occasion, not per year, although HMRC can challenge arrangements that look like the limit is being gamed through multiple small gifts.
For gifts over £50 per employee, the excess is a benefit in kind. It must be reported on a P11D (or through a PAYE Settlement Agreement) and is subject to Income Tax and Class 1A National Insurance.
Annual functions (a Christmas party, for example) have a separate £150 per head exemption and are handled differently to ad hoc gifts.
Gifts to clients
Gifts to clients are deductible against corporation tax only if they meet specific conditions:
- The gift costs under £50 per recipient per year.
- The gift carries a conspicuous advertisement for the business (a logo or brand mark).
- The gift is not food, drink, tobacco, or a voucher exchangeable for those items.
Gifts that do not meet all three conditions are treated as business entertaining. Business entertaining is not deductible against corporation tax, even when it is a genuine cost of doing business.
Most branded merchandise (a logo-printed hoodie, a branded notebook) qualifies as an advertising gift rather than entertainment, provided the per-recipient cost stays under £50. If the cost exceeds £50, the full amount is treated as entertainment and is non-deductible.
PAYE implications for higher-value gifts
Where a gift to an employee exceeds the trivial benefits threshold and cannot be covered by a PAYE Settlement Agreement, it becomes a benefit in kind. The taxable value is reported on a P11D. The employee pays Income Tax on the value and the employer pays Class 1A NIC at 13.8 percent.
For most companies, a PAYE Settlement Agreement (PSA) is the practical route for higher-value gifting programmes. Under a PSA, the employer agrees to pay the tax and NIC on certain benefits on behalf of the employee. This simplifies the reporting and avoids the need for individual P11Ds.
Practical guidance
To keep most welcome kits and milestone gifts straightforward:
- Keep per-employee gift cost under £50 for trivial benefit treatment.
- Ensure the gift is not cash or a cash voucher.
- For client gifts, keep the per-recipient annual total under £50 and ensure a logo is visible on the item.
For procurement teams who need a cost breakdown per recipient for their records, the order invoice itemises the per-unit cost. Download it from the orders section of your workspace.