Charitable Giving By Businesses
There are a number of tax incentives to encourage businesses to support UK, EU, Norwegian, and Icelandic charities. Animal charities could benefit greatly from giving by business.
What is the most tax-efficient way for my company to donate money to charity?
Your business can claim tax relief on donations of money to charity under corporate Gift Aid. The way this works depends on whether your business is a company, you are a sole trader, or trading partnership.
Whilst charities can thank you, there are limits on what they can give as a token of appreciation – see further information on the Gift Aid benefit rules.
To give through Gift Aid, your company simply makes a gift of money to charity and deducts that amount from its total profits before calculating its corporation tax. Therefore, the company receives corporation tax relief on the full donation.
Gift Aid donations from the self-employed are treated in the same way as gifts from individuals.
When you make a donation to a charity, CASC or voluntary organisation, that charity is able to claim back the tax from HMRC that you have paid on the donation. This is called Gift Aid and means the charity can get an extra 25p for every £1 that you give.
If your business is run as a partnership, your donations will be eligible for Gift Aid in the same way as donations from individuals. Generally, the donation will be split into equal amounts from each of your individual partners, unless you decide it should be split differently and so notify the charity.
VAT is not affected, unless the charity gives a gift in return that could be viewed as sponsorship.
Giving property, Land or Shares
Your business can claim Corporation Tax relief on the value of property, land and shares donated to charity. You can also claim the relief if you sell shares to a charity at less than the market value. In this situation the relief is deducted from the difference between the market value and the proceeds received from the charity. Gifts will also be exempt from Capital Gains Tax.
Companies can claim the relief by entering the amount into the Charges Paid box of its Corporation Tax Self Assessment return
for the accounting period in which you made the gift.
Partners or the self-employed, details are entered on to the Income Tax Self Assessment form. In addition, any gain made on the gift is exempt from capital gains tax.
The deduction is made against the full market value of the gift, less anything received in return.
Claiming Tax Relief For Employees On Loan As Volunteers
If your employees are seconded to a charity or volunteer during work time and you continue to pay their salary, you can deduct the costs associated with employing that person as if they were at work. You simply treat the expenditure as a normal business expense when calculating profits for tax purposes.
This applies to sole traders, trading partnerships and companies with a trading or investment business.
What You Can Do As An Employee
As an employee, you could suggest any of these ways of helping animal charities to your employer or company, and encourage them. Businesses often prefer to give to charities in their local community, so employees could encourage them to help local animal charities.
For further information on tax effective charitable donating by business, see this website.
Image: There is tax relief available for businesses who allow employees to volunteer during work time. Source
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