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Samples and free gifts – what are the rules?

Samples

Sending samples and free gifts to customers is a great way to promote your business.  But do you know how VAT works for these types of transactions?

Free Gifts for a Business Purpose

These are gifts that you give away in order to promote your business or say ‘thank you’ to customers.

If the value of gifts given to the same person has a total value of less than £50 over a period of 12 months, then VAT does not have to be charged.

If the value of gifts given to the same person has a total value of more than £50 over a period of 12 months, then you must account for VAT on the total cost value of all the gifts and include details on your VAT return.

Free Gifts for a Non-Business Purpose

These are gifts given for a personal use, for example a gift to a relative or friend.

If the goods were not purchased to be used for business purposes, they are not business related and so there is no VAT to be reclaimed or charged.

If the goods were originally bought for the business, and if VAT has been reclaimed on them, then VAT must be incurred when they are given away – with the same value as the VAT that was originally reclaimed.

Samples

If you give away samples, then they are not liable to VAT as long as they fulfil these criteria:

  • it is a specimen of the product you are trying to promote
  • it allows the characteristics and qualities of that product to be assessed without resulting in final consumption – which means that the sample can’t be a ‘final’ version of the product that could actually be used by the recipient

Got any more questions about free gifts and samples?  Just contact us – we’d love to help.

 

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