28 November 2019

Tax relief on gifts to charity through a limited company

Here’s a reminder of how you can claim tax relief against gifts to charity donated through a limited company.

You can claim the total donations made in the accounting period on the corporation tax return for that period, as long as there is a taxable profit. No relief can be claimed on any excess. However, if your company is part of a group of companies, you may be able to pass the relief for the excess donations to another member of the group.

Keep in mind that there are some donations that will not qualify for corporation tax relief. You can’t deduct loans that will be repaid by the charity, nor can you deduct payments that are made on the condition that the charity will buy property from your company or anyone connected with it. Tax relief is not available on dividends donated, as they count as a distribution of your company’s profits.

Some charities may give you something in return for your donation. More often than not, they are a token gift, such as a pin badge. Whilst HMRC have no problem with small gifts, if you receive a larger ‘thank you’, there are limitations on their value in proportion to your donation.

You should also be aware that the recipient charity cannot claim gift aid relief on the company’s donation.

Moreover, it doesn’t have to be a financial donation. You can also donate items that you make or sell, land, property or shares (in another company, not your own), sponsorship payments, and you can even donate your own people – but only on secondment! The tax relief rules around these are slightly different, so do speak to a tax expert to make sure you are making the most of your allowances and reliefs.

If you have any queries around charitable giving and gifts to charity through your limited company, get in touch with our tax team here.

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