Tax and Gift Aid Advice

Tax-efficient ways 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, or you are a sole trader or trading partnership.

Whilst charities can thank you for your donation, there are limits on what they can give as a token of appreciation. In compliance with this ’benefit rule’ we will send you an acknowledgement of the donation, literature about our charity’s work, and any other small tokens of appreciation for the gift where requested/appropriate.

Read on to find out the most tax-effective way for your business to donate money to charity.

Companies (e.g. PLC, Pvt Ltd)

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 your corporation tax. Therefore, your business receives corporation tax relief on the full donation.

Corporate Gift Aid works slightly differently from Individual Gift Aid and your company does not need to complete a Gift Aid declaration or deduct any tax from the donation.

Self-employed (sole-trader or trading partnership)

Gift Aid donations from the self-employed (sole-trader or trading partnership) are treated in the same way as gifts from individuals. These gifts will be treated as paid from taxed income and the charity will claim the relief on qualifying donations. These gifts should be accompanied by a Gift Aid declaration.

Even if you are a higher rate taxpayer, Gift Aid still only applies to the basic rate of tax (20%). However, if you pay a higher rate of income tax, you will have paid either 40% or 45%. You can therefore claim the difference between the basic rate of tax and your highest rate if you make a charitable donation. You can either keep this relief or donate it back to charity.

How do I claim relief?

You can reclaim the money on your self-assessment tax return.

The standard tax return form is called the SA100 and is available online or as a paper version. There is also a short version available called the SA200 which is available as a paper version. These are available from www.hmrc.gov.uk/forms.

If you do not complete a self-assessment form, you can contact your local tax office and reclaim the tax from the donation using the P810 form.

If you would like further clarification please get in touch, and thank you again for your support.

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