Charity Payment through Limited Company
Discussion
I am looking to support some local causes such as local primary school, scouts group etc with payments from my company,
Firstly is this allowed to be done and what happens with the tax man etc, do I need to get a receipt from the receivers to put through the company books,
Also out of interest what do the receivers get of the funds given are they allowed to keep all of it or do they have to pay tax on it, Im not sure the local school with have registered charity status.
Firstly is this allowed to be done and what happens with the tax man etc, do I need to get a receipt from the receivers to put through the company books,
Also out of interest what do the receivers get of the funds given are they allowed to keep all of it or do they have to pay tax on it, Im not sure the local school with have registered charity status.
There is no law preventing a limited company from giving to a charity.
However, most donations to charities by a business will not be eligible for any sort of tax relief i.e. the business cannot claim the cost as a tax deductable expense in its accounts.
In limited circumstances, certain charitable donations ARE allowable for tax purpsoes. These donations must be to a cahritable cause from which the bsuiness MIGHT potentially benefit e.g. a local hosptal, a fireman's benevolent fund etc. Schools won't count.
The recipent of a charitable donation will, by and large, not be subject to any tax on that income. Most registered charities are tax exempt.
However, most donations to charities by a business will not be eligible for any sort of tax relief i.e. the business cannot claim the cost as a tax deductable expense in its accounts.
In limited circumstances, certain charitable donations ARE allowable for tax purpsoes. These donations must be to a cahritable cause from which the bsuiness MIGHT potentially benefit e.g. a local hosptal, a fireman's benevolent fund etc. Schools won't count.
The recipent of a charitable donation will, by and large, not be subject to any tax on that income. Most registered charities are tax exempt.
Obviously, for your own records keep whatever you feel you need to ensure you record the payments correctly.
The Revenue won't be too bothered because they are not going to allow the cost anyway. It will be "Added back" and therefore disallowed in the tax computation.
If your company accounts are subject to a statutory audit, there is more onus on the directors to ensure that proper records are kept.
The Revenue won't be too bothered because they are not going to allow the cost anyway. It will be "Added back" and therefore disallowed in the tax computation.
If your company accounts are subject to a statutory audit, there is more onus on the directors to ensure that proper records are kept.
One extra thing you may wish the charity to consider.......if they are a registered charity & you decide to make a donation, to ensure that the charity gets the maximum benefit from your donation, you may request that the charity register for Gift Aid. This will allow the charity to claim an extra 28% back from central government, thus making your donation much stronger. Also, you can set up a similar scheme with your employees & match their regular contribution, again you can apply gift aid to this too (we did this with a large employer, 12,000 employees, taking just a 10 pence voluntary donation from every salary payment every month, equalling an extra £14,400 annual income, plus 28% for one particular charity- it pays for all their electricity, gas, rates, telephone calls, printing, postage, paper, other stationary etc).
The benefits are that it shows a really strong ongoing relationship between your company & the charity, and maybe gets them to sharpen up their act for their own benefit. Also, it will allow the charity to register for gift aid from any other donations they get (events, entrance fees, programmes, raffles etc- if administered correctly, every penny they raise can claim an extra 28%)
The benefits are that it shows a really strong ongoing relationship between your company & the charity, and maybe gets them to sharpen up their act for their own benefit. Also, it will allow the charity to register for gift aid from any other donations they get (events, entrance fees, programmes, raffles etc- if administered correctly, every penny they raise can claim an extra 28%)
Gift Aid relates to personal income tax - so charities can only claim it when the donation comes from an individual who has paid Income Tax in the year. Obviously, if the employer wants to encourage individual employees within the company to make donations through their pay packet, that is fine - but the employer will not get any particular TAX advantage out of such a scheme.
The original questoin seemed to be about what type of charitable donations were of benefit to the business/company making the donation. The answer to that is virtually none.
The original questoin seemed to be about what type of charitable donations were of benefit to the business/company making the donation. The answer to that is virtually none.
We support a local garden society who keep our locale clean and tidy and plant up the village verges and hanging baskets each spring and summer. It appears in our accounts as 'marketing' as we get a mention on their web site and in the various newsletters and as it makes up about 10% of their income they are always very appreciative. It also stops any complaints about us running a business from part of the house as we do get daily visitors and I am sure the GS would hear about and head off any attempt to cause us problems via the council. I see it as good value for the business for a relatively small sum.
We also give to the NSPCC but this is in lieu of payments we offer to telephone interviewees and we cleared that with HMRC before we did it so that we can claim it as a business expense. They also agreed that a £5 or even £10 donation to the interviewee would not be subject to income tax as long as the interviewees were not chosen as a feature of their job.
This year we paid more directly to have the village cleaned by a roadsweeper as we reclaimed the VAT which made the £250 we usually give go further. I am not sure how HMRC would view that but it seemed more sensible for us to pay for VATable stuff for them.
We also give to the NSPCC but this is in lieu of payments we offer to telephone interviewees and we cleared that with HMRC before we did it so that we can claim it as a business expense. They also agreed that a £5 or even £10 donation to the interviewee would not be subject to income tax as long as the interviewees were not chosen as a feature of their job.
This year we paid more directly to have the village cleaned by a roadsweeper as we reclaimed the VAT which made the £250 we usually give go further. I am not sure how HMRC would view that but it seemed more sensible for us to pay for VATable stuff for them.
Edited by Gordon Brown on Friday 9th November 08:31
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