Christmas is the time of year when we want to show our appreciation to our most loyal clients. Whether we decide to throw a Christmas soiree or send out a card or two, a bouquet of flowers and bottle of wine, it seems like a great idea at the time. However, when it comes to how that gesture impacts on our accounts, it’s not always clear-cut.
I therefore had a chat with a local accountant, to clarify where small business owners stood, when it comes to cards and gifts at Christmas. We discussed the three most common scenarios and how they impact on your finances. Here’s an overview of each.
Sending out Christmas cards to clients and potential clients
Christmas cards can easily fall under the banner of stationary or marketing, as long as you stick to the general rules below. This makes claiming back the expense allowable, as it would be classed as advertising, BUT only if the business logo or name is included.
So, as a rule of thumb – make sure you include your logo on your Christmas cards, if you want to claim back the expense and the tax!
Buying gifts for clients and potential clients
Sending actual gifts to your clients and potential clients does tend to get a bit on the murky side. For each individual client or potential client, you can only spend up to £50 per tax year total – so you need to factor in the cost of any other gifts you’ve sent that same client, during the year.
If your gift includes food, alcohol or tobacco, it would be classed as entertaining and, if you tried to claim back the cost of the gift or the VAT, it would not be allowable.
So, why do so many businesses send out log-embossed pens, diaries and calendars during the Christmas period? Simple – because you CAN claim tax relief for gifts, if:
- They contain a conspicuous advert for your business, AND
- Are NOT food, drink, tobacco or a voucher exchangeable for goods, AND
- The cost is below £50 per person, per tax year.
If you want to gift your clients over the Christmas period and you know they’re partial to a bottle of wine or chocolates – record them as business entertaining. If, however, you want to send them a bottle opener or chocolate making kit instead – as long as it’s under £50, you can claim back the cost!
Taking clients out for Christmas meal or drink
Want to thank your clients in person, with a meal or round or two? I’m sure they’d really appreciate the gesture. However, when it comes to claiming the cost back, this is firmly under the umbrella or entertaining. Whilst you can show the expense in your accounts, it’ll be added back to the profit, before any tax is calculated.
However, please remember I’m not a legal expert, so ALWAYS ask your accountant to give you specific advice for your situation and to clarify where you stand, before you go ahead.
What ideas do you have, for thanking your most loyal clients over the Christmas period? Are you looking to send them something unique to say ‘thank you’ or are you opting for simple Christmas cards instead? Why not share your Christmas client thank you plans, in the comments box below!
Image courtesy of Syda-Productions/DepositPhotos.com