Gift to customer???

[Sweetlana]

Dear Forumers,

I wonder if you can help me.

Our company made a christmas gift to one customer which was a box of champagne (total cost is £125) and few cheaper gifts of wine to other customers. These are not goods we sell that were given away but something specially bought for the purpose of gifts and paid by company credit card.
How should this be posted in the books? Can I post this as business entertainment or should this be posted on directors loan account as alcohol is not welcomed by hmrc or any other suggestion?

Sorry if my question is amateurish, I cant find answer on HMRC site. Is there any HMRC rules on gifts to customers, maximum cost and in particular if gift is alcohol? I know that VAT cant be reclaimed though. If there hmrc reregulation that i fail to found and if you can direct me to it i would be grateful. I am just a student helping with the books and would really be grateful for your help.
Thank you in advance.

 

[spidersong]

VAT can be claimed on business gifts. However with larger gifts VAT will also be payable on the cost of them when they're given away, so mostly this is dealt with by the company not recovering the VAT.

If gifts in a year to any one person cost the company less than £50 then the VAT can be recovered on the cost of those gifts and no further VAT needs accounting for.

So in your case the champagne would have an equal amount of VAT to be paid and reclaimed (i.e. no recovery), the other smaller gifts though may well be recoverable for VAT, and it doesn't matter whether they are alcohol or not.

See: http://www.hmrc.gov.uk/vat/managing/reclaiming/entertainment.htm

 

[RAL]

The gift of alcohol would be a business entertainment and not allowable for the pupose of tax computation. You can post as a business entertainment.

 

[Sweetlana]

Dear Spidersong and RAL,
Thank you very much for your responses - it really helps!
Sweetlana