Branded merchandise & promotional gifts

Conditions

1. The general rule is that business gifts are not allowable deductions against trading profits (section 45 ITTOIA 2005; section 1298 CTA 2009). There is a specific exception for gifts that carry a conspicuous advertisement for the trader, but the exception is conditional and subject to exclusions confirmed in HMRC's Business Income Manual at BIM45070.
2. The three conditions that must ALL be satisfied for a promotional gift to be allowable are: (1) the gift must carry a conspicuous advertisement for the business — meaning the logo, name or promotional message must appear on the gift itself, not merely on its packaging or a separate enclosure; (2) the gift must not be food, drink, tobacco, or a token or voucher exchangeable for goods; and (3) the total cost of gifts (excluding the excluded categories above) given to the same person in the relevant period must not exceed £50. The relevant period is the tax year for sole traders and partnerships, and the accounting period for limited companies.
3. Typical items that can satisfy the conditions: branded pens, notebooks, diaries, tote bags, mugs, USB drives, umbrellas, clothing carrying the business's logo. All must have the branding on the item — a gift in unbranded packaging with a separate business card does not satisfy the conspicuous-advertisement condition. HMRC's BIM45070 gives diaries, pens and mouse mats as examples of commonly allowable promotional gifts.
4. The £50 limit is a long-standing threshold; it has applied for many years and was not changed at recent Budgets. The limit is aggregate per recipient per period, not per gift. If you send two branded items to the same customer in one tax year — one costing £30 and one costing £25 — the total is £55, which exceeds the limit, and the entire amount is disallowed. You cannot disallow only the excess. The statutory basis is section 47 ITTOIA 2005 for income tax and section 1300 CTA 2009 for corporation tax.
5. Food and drink given as promotional items fall within the excluded category regardless of whether they carry a logo. A hamper, bottle of wine, box of chocolates or branded confectionery is not allowable even if the packaging is prominently branded. The exclusion is absolute: no food or drink gift is allowable under this exception, whatever its cost.
6. Branded merchandise sold to customers rather than given away is treated differently — it is stock in trade, not a gift, and the cost of producing or buying it is an allowable cost of goods sold.
7. For VAT purposes, a separate output tax rule applies where the cost of gifts to the same person exceeds £50 in a 12-month period. The income tax and VAT rules use the same £50 threshold but are applied separately and can diverge in timing.

Common mistakes

• Sending a branded item in unbranded or generic packaging and treating the conspicuous-advertisement condition as satisfied — the advertisement must be on the gift, not just on an accompanying card or wrapping.
• Assuming food and drink gifts are allowable if they carry a logo — food, drink, tobacco and vouchers are excluded categories regardless of branding.
• Tracking the £50 limit per gift rather than per recipient per period — the limit is cumulative across all gifts to the same person in a tax year or accounting period.
• Treating a Christmas hamper, a bottle of wine or a gift voucher sent to clients as an allowable marketing cost — these are disallowed business entertainment.

What to keep

• Invoices for branded merchandise showing the item description, quantity, unit cost and the presence of business branding.
• A record of which recipients received gifts and the aggregate cost per recipient per period, to demonstrate the £50 threshold is not breached.

Real-world example

A limited company sends 50 clients a branded notebook (logo on the cover) in October, costing £18 each. All three conditions are met: the item carries the logo, it is not food or drink, and the cost per recipient is £18 (well under £50). The total spend of £900 is allowable. The following month, the same company sends each client a Christmas hamper (food and drink) costing £35 each. Because the hamper is food and drink, it falls within the excluded category regardless of any branding, and the £1,750 total spend is disallowed business entertainment.

Frequently asked

Related allowances