Giving to charity is not only good for charities but, done the right way, it can also save your company corporation tax. As we go through the journey of having more social impact we thought we would share our findings on how you can support charities and save corporation tax. (Please note this article is relevant for UK Limited Liability companies and not Sole Traders, Partnerships or LLPs.)
Charitable Donations to Registered UK Charities
Under HMRC rules donations to registered UK Charities is an allowable expense for Limited Companies. To qualify you need to keep a receipt for the donation, including the name and registered number of the charity. To be diligent it is worth checking the charity is valid by checking the register https://www.gov.uk/find-charity-information
While it is lovely to support a local boy who is very ill, unless they have set up a registered charity, this can not be put through on your company tax return. There is nothing to say the donation can’t be made by your company, it’s just not tax deductible.
Donations to overseas funds are also not tax deductible. It might be worth contacting the charity to see if they have a UK branch you can donate to.
Give as you earn.
You can your employees can donate to charities via your payroll and save tax as the deduction is made before tax, but after national insurance. The scheme needs to be properly registered. See HMRC’s website for more information https://www.gov.uk/payroll-giving
Donating time or working voluntarily off to volunteer.
Another great way to support charities is to allow your staff to time off to volunteer. You can continue to pay your employees for that time and continue to claim the cost for their salaries and wages as if they were still at work.
Sponsorship is more complicated than simply donating as you get something in return, quite often in the form of advertising for your business. You need to be careful if you are getting more than advertising in return, such as free tickets or corporate entertainment. Firstly check the rules with HMRC and get tax advice from a tax adviser if it is complex.
Please be aware that information that the content in this article is for information purposes only, not intended to constitute professional advice, and that the information will not always be up to date. You should always seek professional advice regarding tax matters. Any users relying solely on the information in this article do so at their own risk.