Giving to charities as a business or individual
Giving to charities as a business or individual
If you are donating to charity, you may be wondering if it is better to give as an individual or through a business. Charitable giving is always a good move and there are some tax advantages to doing it through your limited company.
Donating as an individual or a sole trader
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When you donate as an individual, a charity can claim Gift Aid on top of your donation. If you are a UK taxpayer and the money being donated is your own, you can opt to add Gift Aid at no extra cost to you, giving the charity an extra 25p for every £1 you donate. You must pay enough tax to qualify and the charity needs to be registered to offer Gift Aid. The charity will usually include an option to add Gift Aid when you donate.
If you’re a sole trader or an individual, the donation cannot be recorded as a charitable donation on your tax return. If you pay tax above the basic rate of income tax, you can claim the difference between the rate you pay and the basic rate on your donation through your tax return or tax code. For a donation of £100, the charity could claim an extra £20 (20%) and you would receive £20 in tax relief (since the difference between basic rate and higher rate tax is also 20%).
Donating through a limited company
If you make a donation to charity through your limited company, the gift can be recorded as an allowable business expense. As long as you don’t receive anything in return for the donation eg tickets to an event this will reduce your corporation tax bill. For example if you make a donation is £1,000 this will reduce your corporation tax bill by £190. The charity will not be able to claim gift relief on this donation.
Giving to charities in other ways
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Some businesses are able to give in other ways, not just through financial contributions. If you have surplus stock, such as IT equipment for example, these items can be donated and a capital gains allowance claimed against the equipment. Some companies donate office space, which may also be eligible to be deducted from profits, reducing corporation tax. Giving staff time off to volunteer can in some cases be classed as a taxable expense.
Tax and charitable giving are complex areas and there are exceptions to some of the points we have covered above. If in doubt, please do get in touch with one of the team at Wild & Co Chartered Accountants on 01423 222710.
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