Companies can get tax relief on gifts of money to charities. The relief works differently than for individuals, self-employed sole traders and partnerships. This guide explains how companies can claim tax relief when donating money to charity.
- Claiming Corporation Tax relief on gifts to charity
- How to claim Corporation Tax relief
- Time limits for claiming Corporation Tax relief
- Contacting the HMRC Charities Helpline
- More useful links
Claiming Corporation Tax relief on gifts to charity
Gifts of money made to a charity by your company should be paid gross (without deducting Income Tax). The donations are deductible from the total profits of your business when calculating Corporation Tax.
The charity can’t make a Gift Aid tax repayment claim because no tax has been deducted.
Donations that qualify for Corporation Tax relief
Your company can claim tax relief as long as the donation is a payment of money and meets all the qualifying conditions.
For donations to qualify any benefits provided to your company or a ‘connected’ person in connection with the donation must be below the following limits:
|Benefit limits for donations|
|Amount of donation||Maximum value of benefits|
|£0 – £100||25% of the donation|
|£101 – £1,000||£25|
|£1,001+||Made between 6 April 2007 and 5 April 2011||5% of the donation (up to a maximum of £500)|
|Made on or after 6 April 2011||5% of the donation (up to a maximum of £2,500)|
These limits apply separately to each donation.
A company is a person in law and a person is ‘connected’ if they are:
- a company controlled by the same persons as the donor or persons connected to the persons who control the donor
- the persons who control the donor company and any persons connected with them
An individual is connected with an individual if they are:
- the individual’s husband, wife, civil partner or linear relative, for example son, daughter, parent, grandparent, or grandchild
- any linear relative of the individual’s wife, husband or civil partner
Donations that do not qualify for Corporation Tax relief
The following will not count as qualifying donations:
- gifts that come with a condition about repayment
- gifts where your company or a person ‘connected’ to your company has received a benefit over the values specified above in return
- gifts that come with a condition or arrangement that the charity will purchase property (other than as a gift) from your company or a connected person
- a distribution of profits such as a dividend
Companies can also claim Corporation Tax relief on other gifts to charity. Follow the links available to find out more.
How to claim Corporation Tax relief
When your company makes a qualifying donation to a charity, the amount paid is a charitable donation. This means that your company can make a claim in its Company Tax Return to deduct the amount of the donation from its taxable profits.
Your company should keep normal accounting records to support entries on your Company Tax Return along with any other relevant documentation, for example correspondence with the charity in relation to the donation such as a ‘thank you’ letter.
You must keep your tax records for at least six years after the end of the accounting period to which they relate. If HM Revenue & Customs (HMRC) make any enquiries about your Company Tax Return you will need to keep the records until the enquiries are completed.
Charitable donations cannot be used to create or increase your company’s trading losses, and they cannot be carried over from year to year. So if you make a donation of more than your taxable profit, the excess is not tax effective. However if your company is part of a group of companies the excess can be used as group relief.
You can also make donations if your company is not resident in the UK but is part of HMRC’s Corporation Tax regime. This will generally apply to companies trading in the UK through a branch or agency.