If you’re a content creator or a small business owner regularly posting online, figuring out what you can and can’t claim tax relief on can get confusing. The good news is HMRC understand content creation is a real profession (phew), which means you can build a career in it without absorbing all the costs of producing social media content.
Running giveaways and competitions on Instagram is often used as a tactic by businesses to build engagement and brand awareness, but how does it work for tax? In this article we’ll break down how tax relief works for giveaways, and whether they’re eligible as a deductible expense.
Are Instagram giveaways tax-deductible in the UK?
In most cases yes, the cost of providing prizes as part of an Instagram campaign is usually an allowable business expense as long as the competition is a promotional activity and offered to customers or the public. Running competitions like this, or giving away free samples or other promotional items, is treated like any other marketing expense. You can even claim for things like shipping costs to send the winner their prize!
Business gifting versus giveaways at a glance
A giveaway is genuinely promotional, and offered publicly for anyone to win. A gift doesn’t have the same promotional element to it.
A ‘giveaway’ becomes a business gift if there isn’t a promotional element to what you’re doing – for example, because you’re sending unsolicited items without any public engagement or participation. It’s an important distinction because the expense rules for giveaways and gifts are slightly different.
Business gifts, even if you’re sending them to build on your relationship with your clients or suppliers, are only deductible if all of these conditions are met:
- Your business logo is clearly visible on the gift
- It costs no more than £50 per recipient per year
- It isn’t food, drink, tobacco, or vouchers which can be exchanged for goods or services
Are the rules different if I’m a sole trader vs a limited company?
No, the rules for claiming expenses on Instagram giveaways are generally the same whether you’re a sole trader or running a limited company:
- The cost must be ‘wholly and exclusively’ for business purposes
- Giveaways for advertising or promotional purposes are generally allowable as a marketing expense
- Gifts can only be claimed for if they qualify as a business gift
What about gifts or prizes for employees?
Rather like an Instagram giveaway, staff prizes (such as from a raffle or treasure hunt) are an allowable expense as long as the competition is open to everyone who wants to participate. A gift (so they didn’t ‘win’ it, you just gave it to them) is only an allowable expense if it’s considered to be a ‘trivial benefit’. This sort of gift has a slightly different definition to the business gifts you send out to clients, so we explain these in more detail in a separate article.
Are products given away for free considered ‘stock loss’?
No, products you give away for free as part of your promotional activities are considered a business expense under advertising or marketing expenditure. Stock loss refers to products which can’t be sold because they’re lost, stolen, or damaged.
Products taken from your stock and used in giveaways are recorded in your bookkeeping by removing them from ‘stock’ and into ‘advertising’ or ‘marketing’, rather than simply writing them off.
What if I run a giveaway in partnership with another creator or brand?
You’ll still be able to claim tax relief on giveaways you run with someone else, but only on your portion:
- Your contribution to the prize
- Your share of any promotional costs
- Any ads, graphics, or admin you paid for
For example
- You and Brand X run a giveaway that’s worth £550
- You pay £150 for your prize + £100 in shipping and design work
- That means you can claim your £250 contribution as an expense, and Brand X can claim the £300 they paid
Do I need to report giveaway winners to HMRC?
If it’s a giveaway open to the public, and you’re giving away a prize as part of your marketing strategy, then you won’t need to disclose any details of the winner to HMRC. If the item is given as a reward (such as to an employee for hitting targets) then it might need reporting.
Does the size of the giveaway affect whether it’s deductible?
As long as anything you’re giving away is part of your marketing strategy and meets HMRC’s definition of a giveaway (open to the public and clearly a promotion) then the giveaway’s value won’t matter. The cost will be treated as an advertising or promotional expense which is fully tax-deductible regardless.
Record keeping for giveaways
It’s super important to keep records of your giveaways – like you would with any other aspect of your business. This includes:
- Keeping proof of how much the prize cost your business: Such as receipts, invoices, order confirmations, bank statements, and postage or shipping records
- Evidence that it was used for business marketing: For example, a screenshot of the Instagram post, one of the winner announcements, and any caption explaining the promotional purpose
- Details of recipient: Whilst you don’t need to disclose personal details of the winner, it’s best to at least keep their Instagram handle, the date they were selected, and confirmation they received their item (for instance, a DM, screenshot or postage receipt) just in case HMRC ask for proof you didn’t keep it yourself
- Internal records: Monitoring how effective giveaways are for your business will help you manage your marketing costs and be more strategic!
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