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Companies can get tax relief on gifts of money to charities. The relief works differently than for individuals, self-employed sole traders and partnerships. This guide explains how companies can claim tax relief when donating money to charity.
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Gifts of money made to a charity by your company should be paid gross (without deducting Income Tax). The donations are deductible from the total profits of your business when calculating Corporation Tax.
The charity can’t make a Gift Aid tax repayment claim because no tax has been deducted.
Your company can claim tax relief as long as the donation is a payment of money and meets all the qualifying conditions.
For donations to qualify any benefits provided to your company or a 'connected' person in connection with the donation must be below the following limits:
|Amount of donation||Maximum value of benefits|
|£0 - £100||25% of the donation|
|£101 - £1,000||£25|
|£1,001+||Made between 6 April 2007 and 5 April 2011||5% of the donation (up to a maximum of £500)|
|Made on or after 6 April 2011||5% of the donation (up to a maximum of £2,500)|
These limits apply separately to each donation.
A company is a person in law and a person is 'connected' if they are:
An individual is connected with an individual if they are:
The following will not count as qualifying donations:
Companies can also claim Corporation Tax relief on other gifts to charity. Follow the links below to find out more.
When your company makes a qualifying donation to a charity, the amount paid is a charitable donation. This means that your company can make a claim in its Company Tax Return to deduct the amount of the donation from its taxable profits.
Your company should keep normal accounting records to support entries on your Company Tax Return along with any other relevant documentation, for example correspondence with the charity in relation to the donation such as a 'thank you' letter.
You must keep your tax records for at least six years after the end of the accounting period to which they relate. If HM Revenue & Customs (HMRC) make any enquiries about your Company Tax Return you will need to keep the records until the enquiries are completed.
Charitable donations can't be used to create or increase your company's trading losses, and they can't be carried over from year to year. So if you make a donation of more than your taxable profit, the excess is not tax effective. However if your company is part of a group of companies the excess can be used as group relief.
You can also make donations if your company is not resident in the UK but is part of HMRC's Corporation Tax regime. This will generally apply to companies trading in the UK through a branch or agency.
You should claim the relief in the accounting period in which your company makes the donation.
However there are special rules for companies that are wholly owned by one or more charities. As long as a donation is made to the parent charity within nine months of the end of a particular accounting period, the company can choose to treat it as if it was paid in that earlier accounting period. A claim to carry back a gift in this way must be made within two years of the end of the accounting period to which the gift relates.
For more help you can contact the Charities Helpline.