home | news | site index

CLAUSE 73: DEDUCTIONS FOR BUSINESS GIFTS: YEARLY LIMIT

SUMMARY

1.   This clause increases the de minimis limit for expenditure on business gifts from £10 to £50.

DETAILS OF THE CLAUSE AND SCHEDULE

2.   Subsection (1) provides for section 577 of the Taxes Act 1988  to be amended.

3.   Subsection (2)  increases the de minimis limit for expenditure on business gifts from £10 to £50 a year. It also clarifies that the “year” to which the limit applies is a “relevant tax period”.

4.   Subsection (3) defines “relevant tax period”. For corporation tax, it is an accounting period. For income tax, where an assessment is made by reference to a basis period for the year of assessment, the “relevant tax period” is that basis period. Where income tax assessment is not made by reference to a basis period, the “relevant tax period” is the year of assessment.

5. Subsection (4) implements the increase for corporation tax payers with effect from accounting periods beginning on or after 1 April 2001. It implements the increase for income tax payers with effect from the 2001-02 year of assessment.

BACKGROUND NOTE

6        Section 577 of the Taxes Act 1988 provides that expenditure on business  entertainment and business gifts is not generally deductible for the purpose of computing business profits chargeable to tax under Schedules A or D. Similarly, such expenditure cannot normally be deducted from emoluments chargeable to tax under Schedule E.

7.                  However, exception is made in section 577(8) of the Act for expenditure on business gifts which incorporate a conspicuous advert for the donor and where:

·  the item does not consist of food, drink, tobacco or a token or voucher exchangeable for goods; and

· the cost of the item to the donor, together with the cost to him of any other such gifts given to the same person in the same, unspecified, year does not exceed £10.

VAT

8.         The corresponding VAT de minimis limit for business gifts is to be increased from £15 to £50 by virtue of The Value Added Tax  (Business Gifts of Small Value) Order 2001, No 735, made and laid before the House on 7 March 2001 and coming into force on 8 March 2001. The Order is subject to the negative resolution procedure.

__________________________________