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Business Donations to Charity 2024/25: UK Limited Company

Can a company donate to charity -business donations to charity

Introduction 

When you’re running your own UK contracting company or have your own business, can a company donate to charity? If it can claim these, are charitable donations tax deductible (UK)? If we consider whether my business can donate to charity as a limited company contractor, when are donations allowable for Corporation Tax? If your business can donate money to charity via limited company charity donations, it’ll suit the cause you support. What’s more, it’s good to help others who are less fortunate. Therefore, this guide covering business charity donations will consider when charitable donations are tax-deductible for UK companies. In addition, we’ll consider how to make small business donations to charity as a limited company contractor. We’ll also research what this involves and what to consider regarding a company donation to charity.

If you choose to donate to a good cause, can you claim business charity donations (limited company) as part of your business expenses? You may have wondered whether a business can donate to charity before. Many companies are willing to donate to charity (UK). Indeed, many companies donate to charity in the UK. Out of those, many contractor companies make small business charitable donations. Therefore, companies that donate to charity can support good causes, and many choose to do this.

Therefore, let’s research whether charitable donations are tax-deductible for limited companies. What’s more, if UK contractors and small business owners can claim a business donation to charity, how do the tax rules work around charity donations from businesses? In this guide, we’ll look at the tax benefits of businesses donating to charity, the rules around company donations and when such donations for business reduce your Corporation Tax.

Initial thoughts on business donations to charity

Can a company donate to charity, and are charity donations tax-deductible?

When you consider donating to charity from a limited company, what should we think about? Also, when are your company donations tax-deductible, and which factors should we consider? As a business, when you make company donations to charity, you may feel delighted as you can contribute to a good cause. You can donate to charity as a business, and your contractor donation can be to your chosen charity or charities. When you make a charity donation from a limited company, you’ll do a good deed to help those in most need. Indeed, small business charity donations (limited company) can significantly change the lives of less blessed people than us.

Let’s now look at business charitable donations while you’re contracting. When are charitable donations tax-deductible for UK companies if a business makes these? What’s more, besides considering when business donations to charity are tax-deductible, are there any other limited companies’ charity donations tax implications to be aware of? The good news is if you’ve your own company, you can make limited company charity donations. Therefore, if you make a business donation to charity and we consider when business donations are tax-deductible, the company will receive tax relief. However, certain conditions apply. Key, you must satisfy and adhere to these conditions before making Ltd company charity donations.

Common questions 

Contractors and business owners often ask questions about UK companies donating to charity. These pertain to when corporate donations are tax-deductible and include:

  • Can I donate to charity from my business?
  • Can I make charitable donations through my business?
  • Are charitable donations a business expense?
  • Are donations allowable for Corporation Tax?
  • Can you claim charitable donations as a business expense?
  • How much can a business donate to charity?
  • Is donating to charity tax-deductible?
  • Are donations tax-deductible for companies?
  • Are business charitable donations tax-deductible?
  • How much should a business donate to charity?
  • Can a charity claim gift aid from a limited company?
  • What is a qualifying charitable donation for Corporation Tax?

In this guide, we’ll research all the above. We’ll consider how to donate money to charity as a UK business owner. Further, we’ll investigate when charitable donations are tax-deductible for companies in the UK.

How can you claim small business donations to charity?

What should we consider when considering whether a company can donate money to charity? Indeed, the company owner should retain the supporting documents for any charity donations from companies. When we consider if charitable donations are tax-deductible for UK companies and you plan on being a small business donating to charity, it’s important to note that limited company charity donations should be to UK registered charities. If it is, you can claim any business donations to charity as a business expense. This will help reduce the Corporation Tax in your company’s accounts.

How much can a limited company donate to charity? There’s no limit for limited company charitable donations. However, as already mentioned, you must retain the paperwork for your UK contractor company donation. Now, although you may be able to claim company charitable donations under the rules we explain below, limited company contractors often miss two other expenses:

It’s key to note that besides business charity donations (limited company), there are separate rules for business gifts you should consider if you’re thinking about this.

What are the methods of donating? 

Donate to charity on a personal basis 

You can donate to a charity personally and may receive rate tax relief through your Self Assessment tax return. The donations should be made using the Gift Aid system so you can receive tax relief. Any donations not made via Gift Aid won’t receive tax relief. When you use the Gift Aid method to donate, you must provide a declaration. Indeed, you can state either in writing or verbally you’re eligible. In the UK, the largest charities will include Gift Aid declarations on their donation forms or websites.

Sadly, due to the way the UK tax system works, when you claim tax relief on gifts personally, it’ll only favour you if you’re a higher-rate taxpayer. To sum up, you’ll only receive tax relief on a personal basis if your income is in the higher rates tax band. If you’re in the higher rates tax band, your total annual income is above £50,270 in the tax years 2023/24 and 2024/25. Therefore, no additional relief is due on your gifts if your income is in the basic rate band (under £50,270).

Furthermore, if you’ve not paid any income tax and include the donations on your tax return, you’ll pay tax on them. If you do, the charity can claim the tax back. However, in this scenario, you may choose not to include the donations on your tax return, and you won’t have to pay the tax on them.

Pay for business donations to charity through your company

First thoughts 

When you make a business donation to charity, you must retain the documents which support this. Moreover, corporate charity donations must be to a UK-registered charity to receive charity tax relief. You can claim the limited company charity donations as a business expense in your company’s accounts if they are. As a result, they’ll be qualifying charitable donations for UK Corporation Tax. Therefore, your company will save Corporation Tax against its annual tax bill. However, if you make a company donation to a non-registered charity, the business won’t receive UK Corporation Tax relief.

Therefore, if you make company donations to a UK-registered charity, it’ll receive tax relief. This is providing your company makes profits before you go ahead and make your contractor’s donations. In turn, the ltd company charity donations are deductible against your taxable profits, and as a result, your business will pay less Corporation Tax.

What are the various methods available to make business donations to charity?

If you decide to make corporate donations to charity through your business, there are several ways to do this for businesses donating to charity. Therefore, donations by companies can include the following:

  • Donating money to charity. Indeed, when a company donates to charity, this is the most common method of corporate charitable donations.
  • The donation of goods to charity. You could donate trading stock items or equipment (products or services your company supplies).
  • As a company giving to charity, you could donate certain shares or land/property.
  • Make sponsorship payments.

Many businesses donate money to charity, as it’s the most common form of donation. If the charity(s) are UK registered, the company will receive tax relief on the donations.

Donation amount limits & the benefits in return 

It may be the case you receive some form of benefit when donating to charity as a business. An example here might be tickets to a particular event. Therefore, a further condition when you donate money to charity and claim this is that it must be lower than a certain amount to qualify for tax relief. These amounts are:

Donation amount The maximum value of the benefit
Up to £100 25% of the donation
£101 – £1,000 £25
£1,001 and over 5% of the donation (this is capped at £2,500)

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

Different ways to make business donations to charity

HMRC explains the tax rules for a limited company that gives to charity. We’ll now explain these areas in more detail.

Monetary donations

As a general rule, when you give money to charity through your company, it’s tax-deductible. However, there are some exceptions to this for companies giving to charity. First, you can’t claim tax relief on any payments the charity will repay you as a loan. What’s more, you’re not entitled to tax relief on a business donation to charity where there’s a condition the charity will buy something from your business. Furthermore, your company won’t receive any tax relief on any funds given to charity as a distribution of company profit (dividend).

Equipment or trading stock 

Your company can claim full Capital Allowances (tax allowances against company profit) on any equipment it donates to charity.

Also, any donated equipment must have been used by your business. For example, you may buy a new laptop and donate your old one to a charity for their use.

Other types of equipment which qualify are vehicles, office furniture, machinery, etc.

Finally, you can give stock items your business makes or sells to charity.

Certain shares or land/property 

Donating land, property, or shares is Capital Gains Tax-free (unlike selling such assets). However, this is quite a complex area to explain and is rarely used by UK contractors. Please see HMRC’s guide on land, property and shares for detailed guidance.

What other key areas are there to consider?

Sponsorship tax rules 

Sponsorship payments differ from charitable donations because your company will receive some benefit. An example might be that the charity publicly supports or endorses your services or product. Moreover, the charity may show your company’s logo on its branded material and website and have links to yours on its website.

Regarding the sponsorship tax rules, the sponsoring must be `wholly and exclusively’ incurred for the purpose of business trading. Indeed, this rule applies to all business expenses for a UK company. Therefore, if it can be demonstrated the sponsorship isn’t related to the business itself, it’ll not be tax-deductible. For example, in the sporting club where the company sponsors participate in activities, the directors are personally interested in themselves. In this case, HMRC will regard it as a personal hobby and disregard the expense.

Therefore, if you meet the `wholly and exclusively’ test, we can treat sponsorship payments through a company as business expenses. In turn, these costs are tax-deductible for your company.

If you’re making small business donations to charity as a sole trader or a partnership, there are different rules for you. Therefore, in the case of partnership or self-employed charity donations/sole trader donations to charity, you should seek advice from your accountant or HMRC.

Can you claim Gift Aid on business donations to charity? 

Gift Aid can be claimed on personal donations through your personal tax return. However, this doesn’t apply to business charity donations (limited company).

Donate money personally to charity 

When individuals make donations to charity, they can’t claim them as an expense in their tax return. The same rule applies to sole traders and partnerships. On the other hand, companies can claim donations against tax, provided the conditions are met.

Instead, when individuals donate under Gift Aid to charities and community amateur sports clubs (CASCs), the charity can claim an extra 25p for every £1 donated. However, it won’t cost the individual anything extra.

As part of the Gift Aid process, the individual won’t have to make a Gift Aid declaration for the charity to claim the tax. Moreover, the individual can include all donations from the last four years. They can advise the charity about any tax years where they didn’t pay enough tax. As a result, the donations will qualify for tax relief, providing they aren’t more than four times what the person has paid in tax in the tax year (6 April to 5 April).

If the person pays tax above the basic tax rate, they can claim the difference between the rate they pay and the basic tax on the donation. It’s the same if they live in Scotland. The claim can be made via their Self-Assessment tax return or by asking HMRC to amend their tax code.

Final thoughts 

We cover most of the things you must consider regarding whether charitable donations are tax-deductible for limited companies to receive Corporation Tax relief. Besides covering when donations from a business are tax-deductible, we show what to consider for those companies who donate to charity. Moreover, we set out the tax benefits of charitable donations for businesses above.

Many owners of their own UK Contractor Limited company and other small business owners make business donations to charity. They’ll make one-off donations or make these throughout the year through their company. They can choose a good cause and make limited company charity donations every month or once per annum. As a company donating to charity, you may donate money to charity at a time during the year which suits you. In return, you’ll feel content to support a good cause and provide help where it’s most in need.

Finally, following the above notes will be tax-deductible as part of making a business donation to charity through your company. There are many more great guides on this contractor website that explain UK tax rules and conditions for certain expenses. One worth reading to gain more insights on tax saving is our guide on tax tips for contractors.

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