CTM09060 - Corporation Tax: charitable donations relief: formerly charges on income: Gift Aid

CTA10/S189 & CTA10/S191

CTA10/S189 provides for relief to companies for qualifying donations - payments to any of the following qualifying bodies:

  • a charity within the meaning of FA10/SCH6/PARA1, or
  • an eligible body mentioned in CTA10/S468, for example the British Museum, or
  • a Scientific Research Association within CTA10/S49.

This relief is known as Gift Aid.

Refer any doubts about the status of a body to HMRC Charities.

The relief applies to payments made on or after 1 April 2000 that are not otherwise deductible in computing profits for CT and which are not distributions.

Companies do not deduct tax from the gifts and so make gross payments to charities.

A payment made with a view to securing relief under CTA10/S189 is an annual payment in the hands of the recipient, even if the recipient is not a qualifying body as defined above or the paying company is not entitled to relief.

Payments made in the period 1 April 2000 to 31 March 2006

For close companies a payment is a qualifying donation only if all of the following additional conditions are satisfied:

  • the payment is not made subject to any conditions as to repayment;
  • neither the company nor any connected person receives a benefit in excess as the limits set out below* in consequence of making the payment; and
  • the payment is not conditional on, or associated with, or part of an arrangement involving the acquisition of property by the charity (otherwise than by way of gift) from the company or a connected person.

*The maximum benefits that close companies or connected persons may receive in consequence of the payment are as follows:

Amount of donation Value of benefits
£0 - £100 25% of the donation
£101 - £1,000 £25
£1,001 - £10,000 2.5% of the donation
Over £10,000 £250

In addition, the total benefit that can be received by a close company or connected persons from the same charity in the same tax year is £250. If benefits exceed these values the payments will not qualify for relief under Gift Aid. Do not include any CT relief received as a benefit.

References to a connected person above are to a person connected with the company, or a person connected with the company within the meaning of CTA10/S1122.

Refer the company's file to HMRC Charities where the company or a connected person has received a benefit exceeding the maximum permitted benefits.

Companies wholly owned by a charity (CTA10/S191) may claim relief for payments made up to nine months after the end of the accounting period for which relief is claimed.

Payments made under deeds of covenant entered into before 1 April 2000 can qualify as Gift Aid payments provided all the above conditions are satisfied.

Payments made on or after 1 April 2006

For payments made on or after 1 April 2006 the conditions above apply to both close and non close companies, including the maximum benefits and total benefit that companies or connected persons can receive.

Companies wholly owned by one or more charities may claim relief for payments made up to 9 months after the end of the accounting period for which relief is claimed.

For payments made on or after 1 April 2006 the restriction on relief for payments that are distributions is modified. Where the status of a payment as a distribution for these purposes is in doubt seek advice from HMRC Charities Technical Section.

Payments made on or after 1 April 2007

Amount of donation Value of benefits
£0 - £100 25% of the donation
£101 - £1,000 £25
£1,001 - £10,000 5% of the donation
Over £10,000 £500

In addition, the total benefit that can be received by a closed company or connected persons from the same charity in the same tax year is £500. If benefits exceed these values the payments will not qualify for relief under Gift Aid. Do not include any CT relief received as a benefit.

Note: Pre 1 April 2000

Prior to 1 April 2000 relief was due to companies for payments to charities under deeds of covenant and Gift Aid but the conditions were different. If necessary seek advice from HMRC Charities, Technical Section.