CTM09060 - Corporation Tax: charges on income: Gift Aid

ICTA88/S338A (ICTA88/S338 (1) for payments prior to 25 July 2002) & ICTA88/S339

ICTA88/S339 provides for relief to companies for qualifying donations - payments to any of the following qualifying bodies:

• A UK charity within the meaning of ICTA88/S506 (1),

or

• a body mentioned in ICTA88/S507,

or

• a scientific research association within ICTA88/S508.

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.

Treat a qualifying payment for CT purposes as a charge within the meaning of ICTA88/S338 to S338B.

A payment made with a view to securing relief under ICTA88/S339 is an annual payment under Schedule D Case III 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:

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 ICTA88/S839.

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

Companies wholly owned by a charity (ICTA88/S339 (7AB)) may claim relief for payments made up to nine months after the end of the accounting period for which relief is claimed, even if the accounting period ends before 1 April 2000.

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 you should seek advice from HMRC Charities Technical Section.

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 you should seek advice from HMRC Charities, Technical Section.