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Can You Claim Branded Merchandise as a Business Expense?

How branded merchandise is treated for tax: the business gifts exception, the £50 limits for deduction and VAT, staff...

How branded merchandise is treated for tax: the business gifts exception, the £50 limits for deduction and VAT, staff gifts, and what records to keep.

6 min read Last updated 16 Oct 2026

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Written byOliver Galpin

Managing Director

With 20 years at Hotline, Oliver has extensive experience across promotional merchandise, ecommerce and customer experience, with a focus on making branded merchandise simpler and easier to buy.

Why gifts and promotional items are treated differently

The starting position is that expenditure is deductible if it is incurred wholly and exclusively for the purposes of the trade. Advertising and promotion normally qualify.

Business gifts are then carved out and disallowed, to stop entertaining being reclassified as marketing. If that were the whole rule, every branded pen you gave away would be non-deductible.

It is not the whole rule, because there is an exception for gifts that carry advertising. That is where branded merchandise sits, and it is why the branding is doing tax work as well as marketing work.

The conditions that decide it

For a gift to fall inside the advertising exception, three things generally have to be true.

It carries a conspicuous advertisement for your business

A logo, name or message on the item itself, visible rather than hidden. This is the condition branded merchandise is built to meet, and it is worth noting the advertisement needs to be on the item, not only on the packaging it arrived in.

It is not food, drink, tobacco, or a voucher exchangeable for goods

These are excluded from the exception regardless of how well branded they are. See the point below on printed confectionery, because it catches people out.

The total cost of gifts to the same recipient in the year does not exceed a set limit.

The limit applies per recipient per period rather than per item, so several smaller gifts to the same person accumulate towards it. Go over on any one gift and the whole cost of gifts to that person is disallowed, not just the excess. That's what puts a natural ceiling on premium client gifting.

Meet all three and the cost is normally deductible. Miss any one and the gift falls back into the disallowed category.

The detailed guidance sits in HMRC's Business Income Manual at BIM45070. Correct as at September 2026.

The point about printed sweets and chocolates

Food and drink are excluded from the advertising exception, and that includes branded confectionery.

We sell printed sweets and chocolates, and they are an effective promotional product for plenty of purposes. They are not treated the same way as a branded pen for this particular rule, and if the deduction is a significant part of your decision, that is worth knowing before you order rather than after.

The same exclusion applies to branded wine, branded water and anything else consumable.

VAT, which follows different rules

VAT is a separate question from the deduction, and the answer does not automatically match.

Reclaiming VAT on merchandise you buy. Input VAT on goods bought for business purposes is normally recoverable in the usual way, subject to your VAT position.

VAT when you give the goods away

There is a separate rule covering business gifts. Where goods are given away and the total value of gifts to the same person over a twelve-month period goes above a threshold, output VAT may need to be accounted for on them, even though you reclaimed the input VAT when you bought them. Below that threshold it generally does not.

Samples are treated differently again

Goods given away as genuine samples to promote a product are generally not treated as a supply for VAT in the same way as gifts.

The detail is in HMRC's VAT Notice 700/7, correct as at September 2026, and this is the area where a five-minute conversation with your accountant is worth more than any article, including this one.

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Merchandise you give to your own staff

This is a different question again, because giving something to an employee raises the possibility of a taxable benefit rather than a deduction question.

Branded clothing that is genuinely workwear or uniform is normally treated differently from a gift. Where clothing is required for the role and is recognisably a uniform, it is usually not a taxable benefit on the employee. The branding matters here for the same reason it does above: a plainly identifiable company garment behaves differently from a plain one.

Other items given to staff may fall within the trivial benefits rules, which cover small, non-cash benefits that are not a reward for services and are not contractual. There are conditions and a cost limit, both published by HMRC. Our guide to Christmas gifts for staff covers how that rule works in practice.

Anything more substantial is likely to be a benefit in kind and reportable.

If you are ordering clothing for a team, our guide to organising a company hoodie order covers the practical side, and this is the question to put to whoever runs your payroll before you commit the budget.

What to keep

Whatever the treatment, the records make the case. Keep the invoice, keep a note of what the item was and what branding it carried, and keep a record of who received it and roughly what each recipient received across the year, since the limits above are per recipient rather than per order.

A branded item is easier to evidence than most marketing spend, because the advertisement is on the product and the artwork proof shows it. Keep the approved Visual Proof™ with the invoice and you have the evidence in one place.

Where to check

HMRC's own guidance is the source, and it is more readable than its reputation suggests. The Business Income Manual covers the deductibility of gifts, and the VAT guidance covers goods given away and samples.

For anything that turns on your specific circumstances, and most of this does, speak to your accountant. This guide is general information about how the rules are structured. It is not tax advice and it does not take account of your situation.

Frequently Asked Questions

View all FAQs

Can you claim promotional merchandise as a business expense in the UK?

Usually yes. Business gifts are normally disallowed, but there's an exception for gifts carrying a conspicuous advertisement for your business, which is what branded promotional merchandise is. The exception applies where the item carries visible branding, isn't food, drink, tobacco or an exchangeable voucher, and the total cost of gifts to that recipient in the tax period doesn't exceed £50. This is general information rather than advice, so check your own position with your accountant.

What is the difference between a promotional item and a business gift for tax purposes?

The branding. A business gift with no advertising on it is normally disallowed as a deduction, because gifts are carved out to stop entertaining being reclassified as marketing. A branded promotional item carrying a conspicuous advertisement for your business falls within a recognised exception to that carve-out, subject to the other conditions. This is why a branded notebook and an unbranded bottle of wine of the same value are treated differently.

Can you reclaim VAT on branded merchandise?

Input VAT on goods bought for business purposes is normally recoverable, subject to your VAT position. Giving the goods away is a separate question: where the total cost of gifts to the same person in any twelve-month period goes over £50 excluding VAT, output VAT is due on the full cost of those gifts if you reclaimed the input VAT. Genuine samples given to promote a product are treated differently again. Check your own position with your accountant.

Is branded clothing given to staff a taxable benefit?

It depends on what the clothing is. Branded clothing that's genuinely workwear or a recognisable uniform required for the role is normally treated differently from a gift and is usually not a taxable benefit on the employee. Other items given to staff may fall within the trivial benefits rules, which cover small non-cash benefits that aren't contractual and aren't a reward for services, subject to conditions and a £50 cost limit. Anything more substantial is likely to be reportable as a benefit in kind.

Are branded sweets and chocolates treated differently from other promotional merchandise?

Yes. Food and drink are excluded from the advertising exception that covers branded gifts, so printed confectionery, branded wine and other consumables aren't treated the same way as a branded pen or notebook for that rule, however well branded they are. They can still be effective promotional products, but if the deduction matters to your decision it's worth knowing before you order.

What records should I keep for branded merchandise spend?

Keep the invoice, a note of what the item was and what branding it carried, and a record of who received items and roughly what each recipient received across the year, because the limits apply per recipient rather than per order. Branded merchandise is easier to evidence than most marketing spend, since the advertisement is on the product itself and the approved artwork proof shows it. Keeping the proof with the invoice puts the evidence in one place.