VAT for items sold as promotional goods

We've been approached by a business customer with a UK entity, but their head office is in Gibraltar. As we are UK based, shipping goods to a UK-based entity I assumed we should charge VAT at the normal rate. However, this customer has just advised that the goods they are purchasing will be given away as promotional gifts so have advised that they do not expect to be charged VAT. Is this correct?

Hi.
If you sell goods within the UK then they would generally be standard rated with certain exceptions ,printed materials,children's clothing etc.
There are reliefs available to selling certain goods to a customer who donates those goods to qualifying bodies.
Please see the guidance below:
Zero rating goods and services bought with charitable or donated funds
Thank you.

Hi there, Nothing is being bought or sold with charitable or donated funds. We are selling to a UK entity, but they intend to give those goods away as free promotional items on behalf of their parent company in Gibraltar (this is the reason they have given as to why they should not be charged VAT). I have never come across this before. Are they right? Or should we charge VAT as a "normal" sale within the UK?

Hi,

If the scenarios are not met in the following guidance then it would be a UK sale and so would attract the VAT specific to the products you are selling:

Zero rating goods and services bought with charitable or donated funds

The other relief would be if you are exporting those goods overseas.

Please see the guidance below:

Conditions and time limits for zero rating

Thank you.