Most limited company directors spend money promoting their businesses at some point – even in a small way.
This could be anything from building a new website to running a Google AdWords campaign or simply printing business cards.
As long as you incur marketing and advertising costs wholly and exclusively for the purposes of the business, you can usually offset them against the company’s Corporation Tax bill.
In this guide, we look at some of the typical marketing costs you’re likely to encounter while running your company, and explain how these expenses are treated for tax purposes.
Advertising costs
You can normally deduct your advertising costs from your profits for Corporation Tax purposes.
Depending on the type of business you run, this might include:
- Online advertising.
- Newspaper or magazine advertising.
- Trade publication advertising.
- Directory listings.
- Posters, leaflets and brochures.
- Business cards.
- Sponsorship carried out for genuine business advertising purposes.
- Radio or other media advertising.
Online advertising
Most businesses now advertise online.
Your company can normally claim the cost of paid advertising on search engines, social media platforms and other websites where the purpose is to promote the business.
This might include pay-per-click advertising, display advertising, promoted social media posts and paid listings on industry websites.
You can also claim fees paid to an agency or specialist to manage advertising campaigns on behalf of the company.
Website costs
The costs of running a company website will usually be allowable where the website is used for the business.
Typical costs include:
- Domain name registration and renewal.
- Website hosting.
- SSL certificates.
- Website maintenance.
- Software and plugins used to operate the site.
- Technical support.
- Routine website design and development work.
Any regular costs associated with running a small business website (e.g. hosting, domain name renewals, etc.) are usually treated as standard revenue expenses.
However, if you carry out a significant development project that creates an asset for your business or provides a long-lasting business benefit, the cost may be treated as a ‘capital’ cost rather than a revenue cost.
You can read HMRC’s guidance on the capital and revenue treatment of website costs.
Website design and development
If you pay a designer or developer to create or upgrade your company website, the cost clearly relates to the business – but you still need to establish whether it is a revenue expense or capital expenditure.
Routine changes, maintenance, and smaller improvements are normally treated as day-to-day business costs. A substantial new website, major redevelopment or new functionality which provides an enduring benefit may need to be capitalised instead.
Where expenditure relates to computer software, the tax treatment can become more technical. Computer software and rights to use software can qualify as plant for capital allowance purposes, although companies may also need to consider the Corporation Tax rules for intangible fixed assets.
Keep the invoices and, for larger projects, a breakdown of the work carried out. This will help your accountant separate routine expenditure from any capital element.
Can marketing costs qualify for capital allowances?
Some marketing expenditure may involve buying an asset rather than paying a day-to-day expense.
For example, your company might buy reusable exhibition equipment, computer equipment or software which will be used by the business for several years.
Where expenditure is capital, the accounting depreciation charged on the asset is not normally deductible for Corporation Tax. Tax relief may instead be available through capital allowances.
The Annual Investment Allowance (AIA) allows businesses to deduct the full cost of most qualifying plant and machinery from taxable profits, up to the available AIA limit. The limit is currently £1 million.
For larger website, software or equipment purchases, keep a clear record of what the company bought and what it was used for.
Branding and design
Your company can normally claim the cost of creating and maintaining its business branding.
For example, you might pay a designer or agency for:
- Logo design.
- Brand guidelines.
- Business stationery.
- Brochure design.
- Graphics for your website.
- Advertising artwork.
- Other promotional materials.
These costs are normally allowable where the work is carried out for the company and relates to its business.
Search engine marketing and SEO
If you pay an agency or consultant to improve your company’s visibility in search engines, the cost will normally be a business expense.
This might include search engine optimisation (SEO), content work, technical website improvements, keyword research or the management of paid search campaigns.
This can also include subscriptions to AI tools used for business purposes. For example, see our guide to whether Claude AI is an allowable limited company expense.
The same principle applies to other digital marketing services. If the company pays for work intended to attract customers, generate enquiries, or promote the business, the cost will usually be allowable.
Social media costs
Your company can also claim genuine business costs associated with promoting itself through social media.
This could include paid advertising, promoted posts, social media management or fees paid to someone to create content for the company’s accounts.
However, it must have a genuine business purpose.
If an expense is personal rather than business-related, you can’t simply put it through the company because it happens to involve social media.
Exhibition and trade show costs
If your company attends an exhibition, conference, or trade show to promote its products or services, you can normally claim the relevant exhibition costs.
These might include:
- Exhibition stand fees.
- Stand design and materials.
- Promotional banners and displays.
- Brochures and other marketing materials.
- Fees charged by the event organiser.
Other costs associated with attending the event, such as qualifying business travel and accommodation, may also be allowable under the normal business expense rules.
Reusable exhibition equipment may be capital rather than revenue expenditure, in which case capital allowances may be relevant.
Sponsorship
Sponsorship is usually allowable where there is a clear business reason for it.
Your company might, for example, sponsor a local event, organisation or sports team in return for advertising, use of its logo or other promotion.
What matters is what the company gets in return. A genuine sponsorship deal is different from simply making a donation.
If you have a personal connection with the organisation, keep a record of the commercial reason for the payment and the publicity or other benefit the company receives.
Promotional gifts
The tax rules for promotional gifts are more restrictive than the rules for ordinary advertising.
Business gifts are generally disallowed when calculating taxable profits. However, there is an exception for certain gifts which carry a conspicuous advertisement for your business.
A promotional gift will not qualify if it is food, drink, tobacco, or a voucher or token that can be exchanged for goods. You also need to keep the total cost of gifts to the same person within £50 for the accounting period.
The advertising has to be on the gift itself, not just the packaging. Branded pens, diaries, and similar items are common examples.
You can read HMRC’s guidance on promotional business gifts.
There are also separate VAT rules. If your company has reclaimed input VAT on business gifts, it will not normally need to account for output VAT as long as the total cost of gifts to the same person stays within £50, excluding VAT, in any 12-month period.
See HMRC’s VAT guidance on business promotions for more information.
Promotional gifts are not trivial benefits
Don’t confuse a promotional gift to a customer with a trivial benefit provided to a director or employee.
A benefit can normally qualify as a tax-free trivial benefit where it:
- costs £50 or less to provide;
- is not cash or a cash voucher;
- is not provided as a reward for work or performance; and
- is not provided under the employee’s contract.
Importantly, there is also an annual cap of £300 per tax year on qualifying trivial benefits.
These are employment benefit rules, not ‘marketing’ rules, so you can’t use a trivial benefit to turn an otherwise disallowable customer gift into a deductible marketing expense.
For the full official rules, read the government’s trivial benefits guidance.
Entertaining customers is different
Business entertaining should not be confused with advertising and marketing.
You might take a potential customer out for lunch because you hope to win some work, but that does not turn the meal into an advertising expense.
Business entertaining is not normally deductible for Corporation Tax, even if the company pays for it.
The same applies to any VAT charged on business entertainment. You can read the detailed rules in VAT Notice 700/65.
Marketing costs before your company starts trading
You may spend money on marketing-related costs before your company begins trading.
For example, you might pay for a website, domain name, logo or advertising campaign while preparing to launch the business.
Under the Corporation Tax pre-trading expenditure rules, qualifying revenue expenditure incurred during the seven years before the trade begins can be treated as if it were incurred on the first day of trading.
The expenditure must still satisfy the normal tax rules – including the wholly and exclusively test – and it must be a cost which would have been deductible if the company had already been trading.
Capital expenditure does not qualify under this particular seven-year revenue expense rule. However, separate capital allowance provisions can treat qualifying pre-trading capital expenditure as incurred when the trade begins.
You can read HMRC’s guidance on pre-trading expenditure.
Keep the invoices for costs incurred before trading starts and give them to your accountant when the company begins operating.
Which marketing costs can’t your company claim?
You should be particularly careful when working out whether a marketing expense relates to the business, including:
- Personal websites or social media accounts.
- Advertising for a separate business which is not operated by the company.
- Costs with both a substantial personal and business purpose.
- Customer entertaining presented as marketing.
- Sponsorship without a genuine commercial purpose.
- Personal purchases which happen to feature in social media content.
If a cost includes both company and personal expenditure, don’t automatically put the whole amount through the business. Ask your accountant how to treat the cost.
What about VAT?
If your company is VAT-registered, it can normally reclaim VAT charged on marketing and advertising costs where the company purchases them for use in making taxable business supplies.
Make sure you retain valid VAT invoices where required.
There can be additional VAT considerations when you buy online advertising, software or other services from suppliers based outside the UK.
In many cases, the VAT reverse charge applies. Broadly, the UK company accounts for VAT as though it had supplied the service to itself and, subject to the normal input tax recovery rules, claims the corresponding input VAT.
For a business entitled to recover all its input VAT, this is often tax-neutral, but the transaction still needs to be entered correctly on the VAT return.
HMRC explains the rules in its guidance on VAT on services bought from abroad.
If you regularly buy advertising, software, or other digital services from overseas suppliers, make sure you record these transactions correctly.
Keep records of your marketing costs
Keep invoices and receipts for advertising, website, branding and other marketing expenditure paid by the company.
For online services, invoices are often available through the supplier’s account or billing area rather than being sent to you automatically.
It is worth downloading these regularly and storing them with your other accounting records.
For unusual expenditure, such as sponsorship or a large website project, also keep details of what the company paid for and the business purpose behind the expenditure.
For larger projects, retaining a breakdown of individual elements can also help your accountant decide whether any part of the expenditure should be treated as capital.
Need more advice? Get in touch.
Advertising, websites and other marketing costs are common expenses for limited companies, and most genuine day-to-day promotional costs can be claimed.
Some marketing costs need more consideration, particularly large website projects, sponsorship, promotional gifts and anything with a personal element.
If you’re not sure how a cost should be treated for tax purposes, contact the Integro team; we’re always happy to help!
Click here to get in touch with the Integro team.
Also read our complete guide to limited company expenses for more information on the costs you can claim through your limited company.
