Giving 10% profit to charity and avoiding TAX on it.

[simple101]

I intend to give 10% of my company's profit to charity.

I'm not at all sure how this works regarding tax. Id rather give 10% profit before tax so that the charity gets more money. But i also dont want to get into trouble from the revenue.

So, do i tell HMRC that ive given 10% away? Do i declare all earnings, then give the 10% away and claim the tax back?

Im a tad confused about how it will work.

The more money i can get the charity, the better!

[sinizter]

Your company cannot claim tax relief on charitable donation, IIRC.

Edited by sinizter on Monday 12th July 10:44

[Eric Mc]

sinizter said:

Your company cannot claim tax relief on charitable donation, IIRC.

Edited by sinizter on Monday 12th July 10:44

Correct - except in special cases. If the charity has a direct relation to the trade you carry on and the company gets a material benefit from the charity (which flies in the face of the definition of a charitable donation) then it CAN claim tax relief.

The default assumption is that a business gets no tax relief on general donations to charities.

[sinizter]

Eric Mc said:

sinizter said:

Your company cannot claim tax relief on charitable donation, IIRC.

Edited by sinizter on Monday 12th July 10:44

Correct - except in special cases. If the charity has a direct relation to the trade you carry on and the company gets a material benefit from the charity (which flies in the face of the definition of a charitable donation) then it CAN claim tax relief.

The default assumption is that a business gets no tax relief on general donations to charities.

Would some sort of sponsorship deal where the company's logo may be shown somewhere by the charity (provided it is something related to company's business) would qualify ?

[Eric Mc]

Yes - because it wouldn't be a charitable donation any more. It would be a payment for advertising - which is an allowed expense (although HMRC can get a bit wary if the entity receiving the "donation" or sponsorhip money has any sort of connection with the company director(s) or families).

[simple101]

Take this as an example:

i have a stall selling cheese.

If i have the Oxfam company logo displayed with a sign saying 10% of the proceeds go to them, They can get it tax free.

I have nothing, then they cant?

or have i missed the point completely?

EDIT: this assumes of course that i have contacted oxfam and they have something to do with cheese.

Edited by simple101 on Monday 12th July 14:09

[sinizter]

simple101 said:

Take this as an example:

i have a stall selling cheese.

If i have the Oxfam company logo displayed with a sign saying 10% of the proceeds go to them, They can get it tax free.

I have nothing, then they cant?

or have i missed the point completely?

The other way round I think. Oxfam showing your logo will mean you can claim tax relief on it. You displaying Oxfam logo will not be of any financial benefit to either party.

If you personally (not as a company) donate to Oxfam, they can claim GiftAid and get the extra from HMRC.

[Eric Mc]

simple101 said:

Take this as an example:

i have a stall selling cheese.

If i have the Oxfam company logo displayed with a sign saying 10% of the proceeds go to them, They can get it tax free.

I have nothing, then they cant?

or have i missed the point completely?

The last sentence

You are running a business. The business makes a payment to Oxfam. The business CANNOT claim that donation as a legitimate deduction against its business profits for tax purposes.

AS AN INDIVIDUAL you are perefctly entitled to make a donation to Oxfam. If you make that donation under the Gift Aid scheme, or under a Deed of Covenant, the CHARITY can reclaim the Basic Rate Income Tax you originally paid on the income that you earned to allow you to make the charitable paymnent in the first place.

If you are a Higher Rate tax payer, you PERSONALLY can make a claim for a tax deduction at the Higher Income Tax Rate.

If you are trading through a limited company and the COMPANY makes a donation to charity, there is no tax relief for the company nor is there any possibility of the charity getting any tax back under the Gift Aid scheme.