10th December 2020

With the holidays approaching, we tend to think more about those that are less fortunate than us. Donating to your favourite charity is the perfect way to help improve the quality of life for someone or bring a little happiness to people in need.

If you run a business, volunteering or sending money from your personal bank account is not the only way you can help. Through your business, you can donate money, equipment and even time, and some (tax) advantages come from giving, apart from that warm and fuzzy feeling.

Donating through your limited company

This is as easy as making a donation from your personal account, however, make sure that you keep documentation of the transactions. The cost will be shown as a business expense in the company accounts, lowering the corporation tax.

It must be mentioned that only donations to UK registered charities will get the tax relief, so makes sure this is the case before you send any funds.

What can be donated from a business?

• Money – As mentioned above, your company will pay less corporation tax when it gives to a charity, but be careful, as loans, dividends and payments tied to certain conditions will not be tax-deductible.
• Staff (Secondment) – If you employ people and you can spare them during certain times of the year, you can “lend” them to your chosen charity. You must remember to pay them still while they are away. Remember, salary payments are tax-deductible expenses.
• Land or property – If you give or sell unused property or land to a charity, your company won’t have to pay capital gains tax. Also, their market value can be deducted from the pre-tax profits; effectively lowering the corporation tax liability.
• Equipment – Replacing furniture or computer equipment? Why not donate them? Let your accountant know of any assets donated, and they will ensure that capital allowances are claimed on the full cost.  Corporation tax won’t be paid, like if they had been sold by the company.
• Sponsorship payments can be deducted from pre-tax profits if the charity publicly supports your business. There are visible links between the two in terms of sharing logos and providing links to each other’s websites.

Gift Aid (giving personally)

Are you a UK taxpayer and want the government to top-up your donation with 25p for every pound? If the answer is yes, make sure that you fill in the gift aid declaration form usually included on the donation form of the given charity.

Your donations qualify for Gift Aid as long as they’re not more than four times what you have paid in tax in that tax year.

Donating as a sole trader

Contrary to when you operate a limited company, you cannot claim the donation as a business expense. Instead, you need to declare it on your self-assessment return. The tax savings, therefore, will come from lowering your personal-tax.

If you are a higher rate taxpayer, you can claim the difference between the rate you are paying and the basic rate of your donation.

We hope that this information helps you give more this Christmas and help bring joy to those that need it the most.

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