Can I make charitable donations through my Limited Company?

Corporation Tax, Limited Company, News,

Since Putin invaded Ukraine, we’ve been asked whether it’s possible to make charitable donations through a limited company, and the answer is yes!

We’ve outlined the key points to consider below.

Cash donations

Probably the easiest way to donate, whether for Ukraine or your favourite local charity. Providing your charitable donations are given without you receiving any goods or services, the amount donated will reduce your Corporation Tax, as it will reduce your profit.

You can also donate other items than cash, which will also reduce your tax bill, as follows:

Stock – You can donate goods that you would usually sell through your business. If you’re VAT registered, check with us or your accountant to make sure you’re taking the right approach, as you may still need to account for the sales VAT.

Equipment – If you’ve got equipment already in the business that you want to donate, perhaps furniture, a printer, desks or chairs, tools or machinery, you can do so.

Land, property or shares in another company – These can be gifted or sold at lower than market value to a charity. There is no Capital Gains Tax (CGT) to pay, and your Corporation Tax is reduced by the market value of the donation. (The shares cannot be in your own Limited Company.)

There are also a couple of other options that you may not have considered:

Seconding a member of your team – If one of your employees works for the charity during their normal working hours, you just pay them as usual. There is no administrative implication.

Sponsorship – If you pay an amount to the charity who, in return, provide publicity, from a football shirt, a link to your website, or features you in their next brochure, that’s classified as normal sponsorship and is a normal, allowable business expense.

Keep clear records!

Perhaps the most important aspect of any charitable donations, as with so many aspects of running any kind of business is to keep clear records!

Several people who’ve asked about charitable donations have wanted to do it anyway, regardless of the tax implications. In that case, we just need to know the amount, the recipient, the form the donation took and when it happened.

If you do want to make it a tax efficient donation, the best thing to do is speak to us in advance. We can guide you to ensure it works as you intend. Failing that, we can double check the implications later and complete any related documents (for example if you’re donating shares), if we have the following:

  • Who you paid.
  • What form the donation took.
  • The date the donation was made.
  • The amount of the donation.

We’ll then make sure the donation appears correctly in your Accounts and Corporation Tax calculation.

Business News

We send regular updates that keep clients aware of changes and suggestions on a wide range of subjects; if you’d like to receive those too, just add your details below and we’ll do the rest! We promise not to bombard you and you can unsubscribe at any time.
  • This field is for validation purposes and should be left unchanged.