Charity Donations And Tax Relief

Charity Donations and Tax Relief

Giving back is an important part of running a successful business and charity donations can be a great way to do it. With the right information, charity donations can provide your business with substantial tax relief while also doing good in your community.

So this holiday season, consider giving back and taking advantage of charity donation tax relief.

Which charity donations attract tax relief?

As a limited company, you can make tax deductible donations of cash, equipment, saleable products, land, shares, property, labour (seconded employees) and sponsorship payments. All these costs will reduce your corporation tax liability. Claim the tax relief by deducting the full cost from your taxable profits.

Cash donations

Deduct the full amount of the donation to charity or a community amateur sports club if the donation is not:

• a loan that will be repaid by the charity
• made on the condition that the charity will buy property from your company, or anyone connected with it
• a distribution of company profits (e.g., dividends)

Donations of equipment or saleable product

Equipment could include items that have been used by your company such as office furniture, computers, vehicles, tools and machinery. You can claim full capital allowances on the cost of the donated equipment.

If you donate saleable product, also known as trading stock, do not record the value of stock as sales. This automatically gives you full tax relief on the value of the donated stock.

Land, property or share donations

If you give land, property or shares to charity or sell them for less than they’re worth, you can deduct the current market value (not what you paid for it) from your profit before tax and you won’t incur any capital gains tax either.

NB That charity donations of your own company shares do not attract tax relief.

Seconded employees

If you second an employee to work for a charity or your employee volunteers at a charity in work time, you can deduct the cost of wages and business expenses from your profit before tax to claim the tax relief. This does not apply to employees working for a community amateur sports club.

Charity sponsorships

Sponsorship donations to charities qualify for tax relief as business expenses if the charity:

• publicly supports your products or services
• allows you to use their logo in your own printed material
• allows you to sell your goods or services at their event or premises
• links from their website to yours

Get help to make tax-efficient charity donations

You can get information on how to claim tax relief on charity donations from HMRC website. If you have further questions about charity donations and corporation tax, contact David Masih, our client relationship partner who explain how OnTheGo Accountants can help your business support charities as tax-efficiently as possible. Call 03330 067 123 or email info@onthegoaccountants.co.uk.