Charitable Donations By A Company
Limited companies can pay less Corporation Tax when giving money, equipment or items it makes or sells (‘trading stock’) to a charity or community amateur sports club (CASC).
You can deduct the value of the donations from your total business profits before you pay tax.
You can’t deduct payments that:
- are loans that will be repaid by the charity
- are made on the condition that the charity will buy property from your company or anyone connected with it
- are a distribution of company profits (e.g. dividends)
If You’re Given Something In Return
Any benefits you’re given in return for your donation (eg tickets to an event) must be below a certain value.
- Identify the correct tax code (including the correct prefix i.e. ‘S’ or ‘C’).
- Update their tax code on the payroll record.
|Donation amount||Maximum value of benefit|
|Up to £100||25% of the donation|
|£101 – £1,000||£25|
|£1,001 and over||5% of the donation (up to a maximum of £2,500)|
This applies to benefits given to any person or company connected with your company, including close relatives.
If you get a benefit that’s related to the company, your donation qualifies as a sponsorship payment.
You can claim full capital allowances on the cost of equipment.
To qualify, the equipment must have been used by your company and can include:
- office furniture
- computers and printers
- vans and cars
- tools and machinery
Donating Trading Stock
You don’t have to include anything in your sales income for the value of the gift, meaning you get tax relief on the cost of the stock you’ve given away.
If your company is VAT-registered, you’ll need to account for VAT on the items you give away.
However, you can apply zero VAT to the items if your company makes the donation specifically so that the charity can:
- sell the items
- hire out the items
- export the items
This means you can reclaim the VAT on the cost of the trading stock you donate.
If you can’t zero rate the items, use the VAT rate you normally apply to them.
Sponsoring A Charity
Charity sponsorship payments are different from donations because your company gets something related to the business in return.
You can deduct sponsorship payments from your business profits before you pay tax by treating them as business expenses.
Payments qualify as business expenses if the charity:
- publicly supports your products or services
- allows you to use their logo in your own printed material
- allows you to sell your goods or services at their event or premises links from their website to yours
If you’re unsure whether a charity payment qualifies as a sponsorship payment or a donation, contact the charities helpline.
How To Claim
There are different ways to claim tax relief depending on the type of donation you make.
Deduct From Your Profits
Claim relief in the Company Tax Return that covers the accounting period during which you made the donation or sale if you have:
- donated money
- given or sold land, property or shares
Enter the total value of your donations in the ‘Qualifying donations’ box of the ‘Deductions and Reliefs’ section of your tax return.
There are special rules for working out the value of your donation if you give or sell land, property or shares to a charity.
Deduct As Business Expenses
Deduct costs as normal business expenses in your company’s annual accounts if you have:
- seconded employees
- sponsored a charity
Claim Capital Allowances
Claim capital allowances on the cost of equipment you donate in your company’s annual accounts.
If You Donate More Than Your Profit
The most you can deduct is the amount that reduces your company’s profits to zero.
If you donate more than your total profits you can’t:
- declare trading losses on your tax return
- carry over any remaining amount to your next tax return
MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.
MATCH Accounting Limited