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Giving is good. Your (limited company) business can donate to a charity and benefit from it too!

Firstly, let’s just remember that giving isn’t just financial. There are many ways you can support a charity. For example:

  • Equipment or trading stock (items you make or sell)
  • Land, property or shares in another company (unfortunately shares in your company don’t count)
  • Employee time (secondment of employees)
  • Sponsorship payments
  • Money (well of course we still needed to put that one on the list)

When you support a charity through any of these means you are able to claim tax relief, which comes out from your business profit before tax, which in turns decreases the total payable tax for your company. Let’s take a look at how each of these work according to the HMRC.

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Equipment

You can donate physical items, such as office furniture, computers, vehicles, tools, and more. Make sure these have been used by your company to be considered a donation.

Through these donations you can claim full capital allowances for the cost of the equipment given. For more information on capital allowances check this out.

Stock

When trading stock that your limited company sells, you don’t include anything in your sales income for the donation’s value. So, you get tax relief on the cost of the stock you’ve donated! But beware VAT. If your limited company is VAT registered you must account for these items too.

Great news though! You can apply zero VAT to these items if your company make the donation for the charity to sell the item(s), hire them out, or export them.


Land, property and shares

Before you go ahead with any of these, it’s important to contact the charity and make sure they are able to accept accept the donation as there may be tax, legal, or internal implications they need to adhere to to accept these types of donations.

First, calculate how much the donation, in an open market, would sell for. This will help you then work out how much tax relief is claimable. It’s important to keep records of this type of donation for at least 6 years with details showing you’ve made it and the charity has accepted it.

Land or property

Get a certificate (or letter) from the charity with: a description of the land/property, the date the donation was made and a statement confirming the charity now owns that land/property.

Shares

Complete a ‘stock transfer form’ with details about taking the share’s out of your company’s name and putting them into the charity’s name. NOTE: you cannot claim donations of shares from your own company.


Employee Time

business charity donate volunteer
Volunteer time

This can work as: temporarily transferring an employee to work for the charity or an employee volunteering time with a charity covering work hours. You can deduct costs as normal business expenses.

However, you must continue to pay the employee(s) and run PAYE on their salary, but you can set the costs (expenses and wages) against your taxable profits as if they were working for you during those hours.


Sponsorship Payments

Certain criteria must be meet for a payment to be considered a “sponsorship payment”. These include, if the charity:

  • publicly declares support of your products, good or services
  • allows your use of their logo on printed materials
  • allows sales of your products, good or services at their events/premises
  • links from their website to yours

Remember, sponsorship payments are not the same as donations. This type of payments means you are getting something in return whether that be publicity, sales, or otherwise. Make sure the charity is happy to proceed, because there may be further tax implications for the charity.

You can deduct sponsorship payments from profits pre-tax by treating them as expenses.


Money

business charity donate money
Donate money

You can reduce your corpration tax when giving money to a charity. Simply deduct the donation value from total profits pre-tax.

Some payments don’t qualify. For example:

  • Loans
  • Payments with condition that the charity will buy property from the company
  • Donations that re simply distributed profits, such a dividends.

What if the company gets something in return?

If the cahity decides to give you something in retun for the donation (for example a product, ticktes to an unrealted event, etc), it’s value is capped.

  • Up to £100 – 25% of donation
  • £101-1000 – £25 max
  • £1001 and up – 5% of donation (maximum £2,500)

It pays to make a difference.

Giving to a charity is a powerful and simple way to make a difference. With consumer awareness on the rise and expectations increasing to see business behaving ethically, supporting a charity is a quick way to impact communities and support those already working “in the field”. It’s also great for your business as it leads to tax relief and employee and consumer satisfaction.

Want your business to donate to a charity? Get matched to charities and connect within minutes!

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For more information refer to the HMRC website: https://www.gov.uk/tax-limited-company-gives-to-charity

Disclaimer: Younify cannot provide tax or financial advice and you should not rely on information given on this post or in our website to determine any accounting, tax or financial consequences of making a donation to charity. We recommend you to consult your own accountant or financial advisor to understand any accounting or tax implications that may be relevant to you.

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