Tax Reliefs on Charitable Donations for Companies

By: In2Accounting

Not many Company owners are aware that as a Limited Company you may be eligible for Tax Reliefs on Charitable donations that you make. And that doesn’t mean just making monetary donations – there are tax reliefs available for your company on a variety of charitable actions from Equipment to Your Employees Time! 

Not only are you helping people, animals, the environment – whatever you choice of charity maybe – but you can reduce your tax bill too. 

How it Works 

In a nutshell, the amount you donate is deducted from your Company profit pre-tax, therefore reducing the amount of tax your company will pay. 

 

What Types of Charitable Company Donations qualify for Tax Relief

  1. Donations of Employee time

If you allow your employees to spend some of their usual paid working hours performing charitable acts – you can deduct any costs as normal business expenses.

 

Continue to pay the employee and run PAYE on the salary as usual. You can deduct the costs (including wages and business expenses) from your taxable profits as if they are working for you as normal.

 

2. Donations for Trading Stock

If your company donates trading stock to a Charity, you can deduct the full cost of the stock from your pre-tax profits. 

 

3. Donations of Equipment

If you donate company equipment to a Charity, full capital allowances can be claimed on the cost of the equipment you donate. 

 

4. Donating Money 

While donating money is potentially the most common way in which Company may choose to Donate to charity, it also has more rules you need to adhere to, to make a valid and acceptable Company Charitable Donation. 

The money you donate cannot be a loan or in other words, you should not be expecting any kind of repayment in either in money or in services or any other restrictive conditions. 

You also cannot make the donation from Dividends or Company Profits. 

 

HOW TO CLAIM YOUR COMPANY TAX RELIEF ON CHARITABLE DONATIONS 

Company Tax Reliefs on Charitable donations are claimed through the Annual Company Tax Return in 3 different ways, depending on the type of donation your company has made. 

 

 

As an Expense

If your charitable donation was 

  • ‘Your Employees Time’ or
  • ‘Sponsorship’

As a Relief on Pre-Tax Profit

If your charitable donation was a donation of 

  • Money or
  • Stock

As a 100% Capital Allowance

If your donation was Company Equipment  

 

 It’s worth noting that although it is not an all together complicated process to claim your tax relief, you need to record charity donations and payments correctly in order to successfully your obtain tax relief. For example, the type of payment or donation governs where and how you record the transaction in your accounts – which could become a bit complex depending on the type of donation you have made. 

 

Get in touch with our team of experienced accountants and we can help you ensure your Tax Return is completed correctly to show that your Charitable Donations are eligible for Tax Reliefs. 

 

In2Accounting 02081128229

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