A common question we hear from business owners is, “Can I reclaim VAT on business gifts for clients or staff?” The short answer is yes, but as with all things HMRC, there are specific rules and conditions you need to follow to stay compliant. Whether it’s a branded pen for a client or a small token for staff, understanding the VAT implications can help you save money and avoid unnecessary pitfalls. Here is a short overview on gifting and reclaiming VAT to help answer the question better.

Understanding VAT on Business Gifts

When your business purchases gifts intended for clients or staff, the VAT on those purchases can often be reclaimed, provided the gifts are for legitimate business purposes. However, there are important rules around the value and documentation of these gifts, especially concerning the £50 limit.

The £50 Rule

HMRC permits VAT reclamation on gifts with a total value (excluding VAT) of up to £50 per recipient within a 12-month period.

For example: If you give a client a branded pen worth £20 and later a diary worth £25 during the same year, the combined value is £45, which means you can reclaim the VAT on both items. However, if the total exceeds £50, such as three gifts costing £20 plus VAT each, totalling £60, you cannot reclaim any VAT on those gifts for that recipient within the year.

Gifts to Employees

Gifts to staff are generally treated similarly to client gifts regarding VAT. If the total value of gifts to an individual employee stays under £50 in a 12-month period, you can usually reclaim the VAT, provided the gifts are for business purposes and not personal.

Trivial Benefits: Some small gifts to employees may qualify as ‘trivial benefits,’ which are exempt from tax and National Insurance. To qualify, the gift must:

Cost £50 or less.
Not be cash or a cash voucher.
Not be a reward for work or performance.
Not be in the terms of their contract.

These gifts also allow VAT recovery, making them a practical way to reward staff while reclaiming VAT.

Exceptions and Considerations

While the rules are straightforward, there are exceptions:

Non-business gifts: Gifts to friends or family unrelated to the business are not eligible for VAT reclaim.
Promotional Gifts: For items given as part of a promotion (e.g. ‘buy one, get one free’) different VAT rules may apply. Knowing the distinction between genuine gifts and promotional offers is crucial.

Keep Accurate Records

As with any claims, maintaining accurate records is vital. Diligent record-keeping helps ensure your claims are HMRC-compliant and ready for inspection if needed. Ensure you document:

The cost of each gift.
The recipient’s details.
The date of the gift.
The business purpose behind the gift.

Gift Smarter, Save More

Reclaiming VAT on client or staff gifts is entirely permissible within HMRC guidelines, mainly governed by the £50 threshold over a 12 month period. Always ensure your gifts are genuinely for business purposes and keep thorough records to maximise your VAT recovery.

Need support navigating VAT or other financial matters? We’re here to help! From tax compliance to staff incentives, our team can guide you to make the most of your business finances and growth opportunities.

Curious about keeping staff gifts tax and VAT efficient? Learn more in our Understanding Trivial Benefits guide.

Disclaimer: The information mentioned in this blog was correct at the time of posting (November 2025) and has not been updated for any future changes in tax law or HMRC practice. The contents of this blog has been produced as a helpful reference point, and the information provided should be used as a guide only. You should discuss your specific circumstances directly with us before taking any action based on the information included in this blog.