Are charitable donations tax-deductible for uk companies?
Donating through a company
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When a company donates to a registered charity, it can deduct the donation from its total profits before calculating its Corporation Tax. This reduces the company’s taxable profits and, therefore, its Corporation Tax liability.
In order to qualify for these tax benefits, donations must be made to UK-registered charities and proper records must be maintained, including receipts and documentation of the donation’s value and type.
Donating through a limited company
If you plan to make a donation to Teenage Cancer Trust through your limited company, it’s important to keep all documentation related to the donation. These donations can be recorded in your accounts as a business expense. Donating through your limited company reduces your profits, which in turn decreases your Corporation Tax liability.
Donating as a sole trader
If you’re a sole trader, or in partnership, charitable donations aren’t treated as everyday business expenses. Therefore, if you make a donation from your business account, you’ll need to record it as personal ‘drawings’ or a non-business transaction.
If you’re a higher-rate taxpayer, you can claim the difference between the higher rate and the basic rate of tax on your donation. You can do this either:
- through your Self Assessment tax return
- by asking HM Revenue and Customs (HMRC) to adjust your tax code.
If you’re considering making a gift from your company, please contact us at [email protected]).
Charitable donations Q&A
What is eligible as a corporate donation?
- Donations can include money, equipment, land, property, or shares.
Which donations are not eligible as tax-deductible?
You can’t deduct tax from the following donations:
- Loans the charity is expected to repay
- Donations made on the condition that the charity will purchase property from your company or anyone connected with it
- Distributions of company profits such as dividends
Is a corporate donation eligible for Gift Aid?
- Corporate donations do not benefit from Gift Aid, but the direct deduction from profits offers a straightforward reduction in taxable income.
Can Teenage Cancer Trust claim Gift Aid on my donation as a sole trader?
Gift Aid can be claimed on donations from sole traders provided the following conditions are met:
- Eligibility: The donation must come from the sole trader’s personal funds, not from the business’s income. The sole trader must also be a UK taxpayer.
- Gift Aid Declaration: The sole trader needs to make a Gift Aid declaration to the charity, confirming that they are a taxpayer and that they want the charity to reclaim tax on their donation.
- Taxpayer Status: The sole trader must have paid enough Income Tax or Capital Gains Tax in the tax year to cover the amount that the charity will reclaim.