Should you send clients a Christmas gift?

Send one if you'd like to, but don't expect to claim the cost of a hamper. HMRC treats client gifts as entertaining, which you can't deduct, with one narrow exception: a gift that carries a conspicuous advert for your business, costs no more than £50 per person, and isn't food, drink, tobacco or a voucher. The hamper, the wine and the gift card, the classic Christmas gifts, are exactly what that exception leaves out.

This is the first part of our series on Christmas marketing, checked, which sets out what the rules and the platforms say, with a link to each source. It isn't tax or legal advice.

What HMRC allows

HMRC's business income manual says gifts "which contain a conspicuous advertisement for the trader are generally allowed". Then it takes most of that back. The cost isn't allowable if "the gift is food, drink, tobacco or a token or voucher exchangeable for goods", or if the cost of that gift, added to any other gifts to the same person in the same tax period, "exceeds £50".

As the same HMRC page explains, that period is the tax year if you're a sole trader or a partnership, and your accounting period if you're a company. So the £50 is a running total for each client over the year, not a limit on each gift. HMRC's own examples of gifts that do qualify are diaries, pens and mouse mats, and it adds a detail that's easy to miss: "The advertisement should be on the gift itself, and not just on the wrapping."

Why the hamper doesn't qualify

Wine, chocolates, biscuits, a bottle of something and a gift card are each food, drink or a voucher, so none of them is deductible, however much or little you spend. A branded notebook that stays within HMRC's £50 limit is.

Is it worth sending one anyway?

That's a separate question from the tax, and we've seen no evidence either way on whether a Christmas gift wins a business more work. My own view is that a gift chosen to qualify for the deduction looks like marketing, while a gift chosen because the client will like it looks like a gift. You can't have both at once, so decide which one you're sending.

Choosing what to send

• If you want the deduction, send something branded and non-consumable, inside the limit above, with your name on the gift itself.
• If you want the client to enjoy it, send the wine and accept that you're paying for it out of taxed profit.
• Keep a note of what you've sent each client this year, because the limit is a running total rather than a cap on each gift.
• A handwritten note costs nothing, is allowed, and is the thing people actually keep.

A gift is the smallest part of Christmas. The rest of this series covers emailing your list an offer, running a prize draw and getting your Christmas hours onto Google. And if you're weighing a gift against everything else the money could do, what marketing costs in the UK sets out the alternatives, and our 90-day marketing plan puts them in order.