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Charitable Donations, What Do I Need To Know?

    Are you thinking about donating equipment or money to a charity? If you are, then you must be sure you are using the correct tax treatment and keeping all of the relevant records.

    There are many pros to running a successful business, of course. However, one of the most important is that you are able to contribute to help causes that are close to your heart. While this may be very rewarding, if you are planning on making any upcoming donations to charities then you need to ensure that you keep HM Revenue & Customs (HMRC) informed.

    If you have your own company, then you are able to make limited company charity donations. When you do this, your company will receive tax relief, however, certain conditions do apply and you will need to adhere to these conditions before you will be able to make any limited company charity donations.

    There are a couple of restrictions you should be aware of regarding tax deductibility; 

    Donation AmountThe Maximum Value of the Benefit
    Up to £10025% of the donation
    £101 – £1,000£25
    £1,001 and over5% of the donation (capped at £2,500)

    The above applies to the benefits receivable by anybody connected to your company. This also includes any close relatives.

    The Different Ways To Donate Business Donations To Charity

    • Monetary Donations

    You are not able to claim tax relief on any payments the charity will pay back to you as a loan. Furthermore, you are not entitled to tax relief on business donations to charity where there are conditions for the charity, eg. they will buy something from your business as a result of your donation.

    • Equipment or Trading Stock

    Your company is able to claim full Capital Allowances (tax allowances against company profit) on any equipment it donates to charity. The equipment that you donate must have been used by your business/company. Eg, if you buy a new laptop then you could donate your old one to a charity for their use. Other types of equipment that qualify for donations are vehicles, office furniture, machinery, etc.

    • Certains Shares or Land/Property

    The donation of land, property, or shares is Capital Gains Tax free. However, overall, this is quite a complex area to explain and is very rarely used. If this is something you would like to know more about then get in touch with us. 

    • Sponsorship Payments

    Sponsorship payments are a little different from charitable donations as your company will receive some benefit in return for their donation. Eg, the charity might publicly support or endorse your services or product. Sponsorship payments are treated as company expenses. Therefore, these are tax-deductible.

    Other Important Information

    Gift Aid can be claimed on personal donations through your personal tax return. However, this is not applicable to business charity donations.

    When an individual makes donations to charity, they are not able to claim these as an expense in their tax return. The same rule applies to sole traders and partnerships, too, whereas companies can claim donations against tax, providing the conditions are met.

    If you are considering making donations through your company/business and are looking for more advice or guidance then please do not hesitate to get in touch with us, we would love to help!