Please could anyone help with my query. I have a new client who buys in goodie bags and fills them with bits of food (energy bars etc), then she gives one to each of her new clients as incentives (she's a fitness instructor). Would this be an allowable expense as a free sample or event hospitality which she can't claim as an expense?
Hi Karen
Just one for the future - its always worth mentioning in such posts whether the client is a limited or sole trader etc as the tax rules differ. Obviously in this instance, given your recent postings, we know this one is s/e.
General concept is - expense has to be wholley and exclusively. This doesnt appear to be on the face of it, so immediate thoughts are no.
Are the bags, energy bars etc badged with the name of her business?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi,
Thanks for your response. No, don't think they have business name on them. With the "wholly and exclusively" the bags are ONLY for her clients and not given to anyone else.
Hi Karen
Sorry to disappoint, but it is dis-allowed for tax purposes. General rule is that such provides no opportunity for tax relief, although there are a number of exceptions but the items you are referring to are not covered by the exceptions.
W&E for the purpose of trade doesnt cover it Im afraid as the provision of such does nothing for her business. Makes her clients smile (maybe) but thats about it!
I would ensure expenses relating to such are keyed to a separate pot / account / nominal code / expense category (not sure what they call them in Wave) and highlight them to the Accountant at year end so they can disallow in the tax computation.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
not specifically to Karen as Joanne has already put you on the right path. But for others, this point comes up a few times a year and I think that people need to know where they need to look for the answers. (I'll provide a link at the bottom to the regulation).
The regulation behind this is section 47 of the Income Tax Act (2005) (as amended)
For the instance discussed in this thread refer specifically to s.45 (1), S.46 (2), S.47 (3) (specifically (a)).
paraphrasing the regulation (this is three paragraphs patched together for readability. Always refer to original legislation ad do not quote third party usage) :
The prohibition in section 45 on deducting expenses incurred in providing gifts does not apply where the gift incorporates a conspicuous advertisement for the trader unless the gift is food, drink, tobacco or a token or voucher exchangeable for goods.
It goes on to give the financial limit of gifts but the specifics here are for generic food that carries no branding to the business (even if the outer bag does, the contents do not), plus the item is food which is specifically excluded as a gift anyway.
Here's a handy link for you all to review the legislation yourselves.
Note that for companies you would need to refer to section 1300 (actually 1298 thru 1300) of the Corporation Tax Act (2009). But it carries very similar wording.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have to say, as a new bookkeeper on the block, it is very handy to know where to look for any regulations and relevant information. Maybe it would be a good idea to have the Income Tax act in my favourites !!! Lol
bit) yesterday.
