Commentary

V6.169 Key VAT considerations for business promotions

Part V6 Business by business

V6.169 Key VAT considerations for business promotions

Business promotion schemes

V6.169 Key VAT considerations for business promotions

Business promotion schemes are commonplace but they vary considerably in form and can present significant VAT challenges. This paragraph considers some of the key VAT issues that can arise from the operation of typical business promotion schemes.

Business promotions—gifts

Many businesses will give gifts to customers and staff. Gifts are broadly to be understood as goods or services which are given away with no consideration (monetary or otherwise) given in return. For circumstances where there is non-monetary consideration, see 'Business promotions—non-monetary consideration' below. In Notice 700/7/19, para 2.2, HMRC describe a business gift as

“A business gift is a gift of goods that is made in the course of promoting your business and for which you were entitled to reclaim the VAT you were charged on its purchase as input tax. By 'gift' we mean a definite, voluntary and unconditional transfer of the goods for no consideration.”

Gifts of goods

It is normally necessary for there to be a link between supply of goods by one person and the consideration provided by another for a supply to be within the scope of VAT (see V3.104). However, gifts of goods without consideration can nonetheless give rise to a deemed supply and a requirement to account for output tax. For details of the deeming provisions for gifts of goods and exceptions to these provisions (including for certain goods costing £50 or less and 'samples'), see V3.211.

Examples given by HMRC of business gifts include:

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