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• # 73216
• Tue 26 Jul 2011 07:37 PM

Hello all, I've now got my first client and today he asked a question that I wasn't sure of the answer for. 

Basically my client spends a fair amount on small gifts (pens, key rings cups , etc.) that he intends to give to his clients, all are branded with his business name and logo, and he want to but these through his accounts so that he can keep track of how much he spending on them and how they are affecting the profitability of the business.

I know that business entertainment and gifts are generally not an allowable expenses (except if they are promotional gifts, which these are not anyway).  But this is from the view of HMRC is it not?  As long as I put these into a "non-allowable expenses" ledger (with a note saying that they are not to be used for working out taxable profit) then is there any problem in putting these expenses through the accounts?

Thanks in advance.
Torben

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• # 73219
• Wed 27 Jul 2011 07:27 AM

Hi Torben,

You are correct in that business entertainment is generally not an allowable expense, whether is it VAT, corporation tax or income tax.

I stand to be corrected, but I believe that you are allowed to give clients gifts up to a total of £50 worth of gifts in one year without incurring tax, however I'm not sure which tax this is, maybe corporation tax which won't be applicable if your client is a sole trader/self-employed.

In my experience, directors and/or owners of businesses will put through personal and/or non-allowable expenses through the business accounts, and you can put them through the accounts as long as they are seperated off into a director's loan account/owner's drawings account (if it is a personal expense) or they can be identified as not allowable for tax purposes, how you choose to post these is up to you, you can choose to post them to a "Client Gifts" account.

I hope that makes sense?

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• # 73223
• Wed 27 Jul 2011 08:07 AM

I would suggest that gifts branded with the business name and logo could be legitimately posted as an Advertising, Marketing or Promotion expense.

Edited at 31 Jul 2011 09:46 AM GMT

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• # 73320
• Fri 29 Jul 2011 11:35 PM

Hi Torben

It's late, it's the school hols and I'm not getting much work done just now and my brain is mince, however I keep reading your post and thinking.....it's technically advertising/marketing which is allowable.

The reason I have always put it through as advertising/marketing is because the reason a business get their logo on things is so that

a) It's better than word of mouth - your client lends someone a pen and they keep it and one day need the business services - hey presto a potential new client

b) Key rings and cups are still marketing/advertising as although they dont leave the client's premises they are a reminder of the services provided, the client is raking for the number etc, remember the cup / keyring etc. and this helps produce sales.  Almost subconcious sales.....

There are other explanations but I cant get my brain in gear.

Anyways always better to call HMRC and ask - but the big thing is they arent 'gifts'  -  they are a tool for advertising etc.

Anyone else of the same opinion?

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• # 73348
• Mon 01 Aug 2011 08:11 AM

Hi Torben

In answer to part of your question if the ower has non allowable expenses for tax purposes you would still need to record these in the accounts and show them in the P&L as these expenses affect the profitability of the company even though for HMRC purposes they may not be allowable.

When you complete the tax comp you would simply add back the non allowable expenses to the profit.

With regards to the gifts you say these are not promotional gifts why is this?

I would tend to agree with both Mad Liz and Liz D  that these items sound mnore like promottional advertising items than gifts.

Kind regards
Stuart

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