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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 - before tax is deducted. These donations are deductible from the total profits of your business when calculating Corporation Tax.
The charity doesn't need to make a Gift Aid tax repayment claim because no tax has been paid. The charity can claim exemption from tax on company donations.
Your company can claim relief as long as the donation is a payment of money that is not a distribution of profit such as a dividend.
For donations to qualify, any benefits provided to your company or a 'connected' person must be below the following limits:
| Amount of donation | Benefit value limit |
|---|---|
| £0 - 100 | 25% of the donation |
| £101 - £1,000 | £25 |
| Above £1,000 donated up to and including 5 April 2007 |
2.5% of the donation |
| Above £10,000 donated up to and including 5 April 2007 |
£250 |
| Above £1,000 donated on or after 6 April 2007 |
5% of the donation |
| Above £10,000 donated on or after 6 April 2007 |
£500 |
A person is 'connected' if they are:
The following will not count as qualifying donations:
For donations made before 1 April 2006 these restrictions applied to close companies only. For donations on or after that date they apply to all companies.
Companies can also claim Corporation Tax relief on other gifts to charity. Follow the links below to find out more.
Gifts to charity of land, buildings and shares
Gifts to charity of equipment, trading stock, or secondment of employees
When your company makes a qualifying donation to a charity the amount paid is treated as a 'non-trade charge' - this means your company can make a claim in its Company Tax Return to set the amount of the donation against 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) makes 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 non-resident within 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.
Find out more about completing your Company Tax Return
Find out more about Corporation Tax on the Businesslink website
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.
Read more about claiming relief if you're owned by a charity in the detailed guidance notes
For more help you can contact the Charities Helpline.
Contact
the Charities Helpline
Find out about gifts to charity made by sole traders and partnerships
