VATSC03321 - Identifying a supply: Supplies of goods for no consideration: Business gifts: Background
Business gifts are business assets disposed of for no consideration. As explained in VATSC03310, such disposals are deemed to be supplies for VAT purposes.
»Ê¹ÚÌåÓýapp size and value of gifts made by businesses varies but they are most often of low value - for example ties, umbrellas, and calendars. It would be onerous to expect a business to account for output tax on such disposals and VAT act 1994 Schedule 4 paragraph 5 (2) recognises this by not requiring every gift of a taxable person’s business assets to be treated as a supply for consideration (and therefore within the scope of VAT): gifts of small value may be given away without the need to charge VAT on them.
Such gifts are of course enjoyed tax-free and it is the intention that only occasional gifts rather than countless gifts of small value to one person are to be included. Such a person might otherwise have a limitless source of tax-free goods.