Andrew Needham looks at the provision of gifts to customers and business contacts and when recovery of input tax on their purchase is permitted.
With Christmas approaching, businesses will be giving business gifts to valued customers and suppliers. But how much VAT can be claimed back on their purchase?
Wine for Christmas
For example, a regional firm of accountants decides to give each of their valued clients two bottles of wine worth £40 plus VAT of £8.00. In addition, carriage of the wine to the clients will be £9.50 each. The total cost of supplying the free gift will therefore be £55.50.
The accountancy practice is expecting to give away 500 gifts to its clients, so the total VAT would be £4,000.
The first point is that a business is entitled to recover all the VAT on a business gift at the
