Do you like to give gifts of chocolate, wine, sweets or other edible goodies to your customers, suppliers or contacts? This is a great way to say thanks, or just to show you care. Well, Inland Revenue just made gifts of food or drink a little more expensive.
Starting from 1st September 2016, Inland Revenue’s position is that any gifts of food or drink (anything the recipient is expected to eat or drink) will fall under the entertainment regime and will only be 50% deductible. Previously the policy was that gifts of food or drink – when you didn’t know when, where or by whom they would be consumed – would be 100% deductible, whilst consuming food and drink with your customer (for example, at a restaurant) would only be 50% deductible.
If your gift (for example a hamper) was partly food or drink and partly something else, you would be able to make an apportionment.
So, if you intend to give away some Christmas hampers, Christmas cake, wine or other goodies this Christmas, be prepared for your accountant to tell you that you can’t claim the full cost.
The rule applies to both Income Tax and GST.