Are promotional cups a deductible business gift? What HMRC's gift rules and its VAT limit say

A cup with your name on it is the kind of thing businesses hand to clients, suppliers and prospects. Two sets of HMRC rules decide what that costs you in tax: the rule on whether the expense is deductible from profits, and the rule on whether giving the cup away counts as a supply for VAT. Both turn on a £50 limit, set out in the 2005 and 2009 tax Acts and, for VAT, in the Value Added Tax Act 1994 and HMRC's guide, and they count it in different ways.

The starting point: gifts are not deductible

Section 45 of the Income Tax (Trading and Other Income) Act 2005 says the general rule is that no deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade. Section 1298 of the Corporation Tax Act 2009 sets the same general rule for companies. HMRC's manual puts it briefly: business gifts are not allowed as a deduction against profits, and the legislation treats gifts in the same way as business entertaining. Both Acts then list exceptions.

The exception a printed cup can fit

The exception that matters for promotional merchandise is Case B, in section 47 of the 2005 Act and section 1300 of the 2009 Act. It applies where the gift incorporates a conspicuous advertisement for the giver, unless the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or unless the cost of the gift to the giver, together with any other gifts other than those excluded types given to the same person in the same period, exceeds £50. According to HMRC's manual, the period is the tax year for unincorporated businesses and the accounting period for companies. Both sections let the Treasury increase the sum by order.

HMRC's manual (BIM45070) says gifts which contain a conspicuous advertisement for the trader are generally allowed, gives diaries, pens and mouse mats as common examples of allowable gifts, and says the advertisement should be on the gift itself and not just on the wrapping. The manual does not name cups. A cup with the giver's name or logo printed on the cup itself fits the description in the statute, but it is a reading of the wording and not a listed example. Case A is a different exception: an item that it is the giver's own trade to provide, given away in the ordinary course of the trade to advertise to the public generally.

How the limit is counted

The £50 in the 2005 and 2009 Acts is the cost of the gift to the giver, added to any other gifts to the same person in the same period. Food, drink, tobacco and vouchers are outside the exception altogether and are left out of that running total. Once a person's total in the period exceeds the £50 set by the 2005 and 2009 Acts, the exception no longer applies. Because the total runs per person, a cup that costs little on its own still counts towards the total of anyone who receives other gifts from you in the same tax year or accounting period.

VAT counts it differently

VAT is a separate question. HMRC's VAT guide on business promotions, last updated on 25 June 2026, defines a business gift as a gift of goods made in the course of promoting your business and for which you were entitled to reclaim the VAT you were charged as input tax. A gift means a definite, voluntary and unconditional transfer of the goods for no consideration. The guide lists brochures, posters and advertising matter, items distributed to trade customers, and goods given to customers as a thank you among business gifts.

In the version of the guide last updated on 25 June 2026, you do not have to account for VAT on business gifts made to the same person so long as the total cost of all the gifts to that person does not exceed £50, excluding VAT, in any 12-month period, and any 12-month period that includes the day of the gift will do. Above that, you must normally account for output tax on the total cost value of all the gifts where you were entitled to claim the VAT on the purchase. HMRC's supply and consideration manual adds that the £50 relief applies only to gifts made in the course or furtherance of business, not to gifts for personal use, and that a gift within the limit is not a supply for VAT purposes. At 30 September 2026 the Act behind the limit is the Value Added Tax Act 1994: paragraph 5(1) of Schedule 4 treats the transfer of business goods as a supply, whether or not for a consideration, and paragraph 5(2)(a) excludes a business gift whose cost, together with the cost of any other business gifts made to the same person in the same year, was not more than £50. The Act defines a business gift as a gift of goods made in the course or furtherance of the business, cost as the cost to the donor of acquiring or producing the goods, and the same year as any period of twelve months that includes the day of the gift.

The two rules therefore differ in three ways worth noting. The income tax and corporation tax limit runs over the tax year or accounting period, the VAT limit over any 12-month period. HMRC's VAT guide states its limit excluding VAT, while the Acts refer to the cost of the gift and the sources cited here do not say how VAT is treated in that cost. And the tax exception also needs a conspicuous advertisement, while the VAT guide's definition of a business gift does not mention one.

Staff, and one point outside tax

Gifts to employees have their own exception in the same sections, Case C. It applies unless gifts are also provided for others and the gifts for the employees are incidental to those. How employees are taxed on what they receive is a separate matter that this article does not cover.

One rule outside tax is worth knowing before a large gifting programme. The Ministry of Justice's guidance on the Bribery Act 2010 says, in its discussion of bribing foreign public officials, that bona fide hospitality and promotional or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business, and that it is not the intention of the Act to criminalise it. It adds that hospitality and promotional expenditure can be employed as bribes. The same guidance lists the provision of gifts, hospitality and promotional expenditure among the topics a company's bribery prevention procedures might cover, depending on the risks it faces.

What it means for the order

The promotional cups page describes pint and half pint cups printed in one colour or full colour and a 350ml reusable coffee cup printed in one colour, from 50 cups, with a sample cup available and the team checking the artwork before production. For the tax test, the point that follows is practical: HMRC's manual says the advertisement should be on the gift itself and not just on the wrapping, so the name or logo belongs on the cup and not only on a box or a card. If you are planning a client programme, ask for a quote with the quantities and recipients in mind, and check the treatment with your accountant.

Where this stands

This was checked on 30 September 2026 against the statutes and against HMRC's VAT guide, whose page was last updated on 25 June 2026. The 2026 updates to that guide concern its sections 1.2, 6.1 and 6.2, not its gifts paragraphs. The two Business Income Manual pages carry text from 2016 and match the statute as it stands. The oldest guidance cited is the Ministry of Justice's Bribery Act guidance, dated March 2011. The £50 figure in the 2005 and 2009 Acts can be raised by Treasury order, so it is worth confirming before you rely on it after 2026.