Corporate gift taxation

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Corporate gift taxation

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jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28233
Location: escaped from Swindon

Posted: Sun May 06, 07 8:39 pm Post subject: Corporate gift taxation
I am looking for ways to give things to some people who have volunteered time and effort freely in helping my business. I have used cash money in the past, but my accountant has given me a slapping Any idea on the rules and what I can do as a VAT registered company to give some people some stuff without getting too clobbered on the tax?

MarkS

Joined: 01 Aug 2006
Posts: 2626

Posted: Sun May 06, 07 8:59 pm Post subject:
anything that you can view as marketing, sales or educational materials / events? I think there is a limit on the value of such 'gifts' (�50?) but its down to the recipient to declare them on their tax returns. I'll take the training course at CAT I'm looking forward to updating my awareness of your products and services. Nice location you've chosen.

Jonnyboy

Joined: 29 Oct 2004
Posts: 23956
Location: under some rain.

Posted: Sun May 06, 07 9:01 pm Post subject:
Sounds like if it has marsjupiter on it then you'll be OK! I've enjoyed (and purchased) 'corporate hospitality' in the past, So I think short of cash you should be Ok.

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Sun May 06, 07 9:14 pm Post subject:

There's certainly no prohibition on business gifts.
Otherwise there'd be a lot less bottles sold every Christmas!

As long as the recipient isn't an employee, or being "given" things in lieu of wages or is a relative of an employee or director (in which case there would be serious Income Tax questions), there shouldn't be a problem as long as its correctly recorded and nothing is concealed (and its not 'significant' compared to turnover).
You should be able to create a new cost heading (in the same general cost-of-sales section as you might have codes for write-offs, and commission paid to intermediaries.
Dunno about your software, but MYOB was very flexible about allowing you to renumber/rename cost codes.
You could ask your accountant how he'd like to see such gifts recorded.
Or write off some stuff and scrap it. Who is to say it wasn't fixable?
Or create a sales invoice for �1 for whatever item. And mark it "paid by cash". If its queried, you can explain, truthfully, that the price reflected it being a 'contra' deal.

But finding a means of recording them that your accountant is happy with is the safest recommendation...

And it'd be much better to talk to him about maintaining goodwill, promoting the business, demonstrating your technological capabilities, etc, etc, and NOT about it being any sort of reward for services rendered.
You want to make a gift. Nothing dodgy. Where would he like it recorded?

alison
Downsizer Moderator

Joined: 29 Oct 2004
Posts: 12918
Location: North Devon

Posted: Mon May 07, 07 6:47 am Post subject:
What about an extended contract, of a service you already offer them, or an upgrade of somesort.

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28233
Location: escaped from Swindon

Posted: Mon May 07, 07 8:08 am Post subject:
I want to give them far in excess of a trivial amount, and anyhow upgrades to a free service are thin on the ground

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Mon May 07, 07 9:38 am Post subject:

jema wrote:

I want to give them far in excess of a trivial amount, and anyhow upgrades to a free service are thin on the ground

Strictly, if you make corporate "ex gratia" payments, they are taxable by the recipient, and tax-deductable for your company.
It is going to depend on the recipient's status as to what their tax liability might be. So you might potentially make gifts to relatives (kids?) with low income and non-taxpayer status...
Essentially the tax is a problem for the recipient - what you need to do is to make sure that the gift is correctly accounted so that it isn't a problem for you - for example raising the suspicion that you might actually have hung onto the 'kaysh' that you claimed to have given away. Since such 'costs' reduce your taxable profit, and transfer a benefit elsewhere, they are liable to be scrutinised before, and more closely than, fully documented (invoiced) transactions.

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