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There are many ways that businesses can get tax relief for their support charity. Donations can include cash, gifts in kind or employee volunteers. Are you familiar with the full range of techniques and do you know local employers that could be doing more?
• Cash Donations
• Companies
• Self-employed people
• Partnerships
• Tokens of appreciation
• Donations of employees on loan
• Volunteering
• Share Giving
• Donations of land or buildings
• Sponsorship
• Setting up and Promoting Payroll Giving
• Free Downloads
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Cash Donations (All companies can get tax relief when they give money to UK charities, but the relief works differently for companies, self-employed people and partnerships.
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When a company makes a donation, it gets tax relief by deducting the amount given from profits and pays less corporation tax. In 2007/8 the main rate of corporation tax is
28%, and the rate for smaller companies is
19% (Rising to 22% in 2009)
The company should retain any correspondence with the charity as evidence of the gift.
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If someone is self-employed and wants to Gift Aid their donation you should handle it the same way as a donation from an individual.
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Where the company is a partnership, a Gift Aid donation should be treated as donations of equal amount from the individual partners, unless the partnership decides to split it in a different way. The tax position for both you and the donors is the same as for Gift Aid by individuals. Unless one partner has a power under the partnership agreement to make a Gift Aid declaration on behalf of the partnership, you will need a Gift Aid declaration from each partner. This can be done on one declaration form provided it includes each partner's details.
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What you can give as a token of appreciation? When gifts are made by self-employed people or by partnerships, the same benefit limits apply as for individual Gift Aid donations. Where the donation is from a company, there is no limit on what benefits may be given in return unless it is a 'close company' for tax purposes. Broadly, a close company means one that is controlled by five or fewer people. In this case, neither the company nor any person connected with the company can receive benefits of a value which exceeds the limits for individual donations.
More information on Gift Aid...
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Where a company provides an employee to work for a charity on secondment or a temporary basis, the company can continue to deduct the costs of the employment, including the employee's salary, in its accounts.
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Around one in five employees work for employers that support schemes for volunteering, and of these employees, two-fifths participate - equivalent to approximately 1.5 million people.
If employees are volunteering in work time, then the company can claim tax relief for the employment costs that they continue to incur. All they need to do is treat the costs incurred to the company as a result of the volunteering (for example, the person's salary) as a business expense when calculating chargeable profits for corporation tax purposes.
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Companies can claim corporation tax relief for gifts of shares. They can also claim relief if shares are sold at less than their market value. The shares which qualify for relief are the same as those which qualify when they are given by individuals, subject to one exception - a company cannot give its own shares. The tax relief works in the same way as for individuals. Companies get this relief in addition to any exemption from corporation tax on any capital gains on gifts to charity of shares, securities and other assets. Companies should deduct the amount while working out their company profits in the accounting period in which the gift is made. When gifts of shares are made by self-employed people or by partners in a partnership, the deduction is calculated in the same way as for individuals.
More information on Share Giving...
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Companies can claim corporation tax relief for gifts of land or buildings. They can also claim relief if the property is sold at less than its market value. The charity must agree to accept the gift. The type of properties which qualify and the conditions for the relief are the same as those that apply to individuals. The amount that may be claimed is also calculated in the same way as for individuals.
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Sponsorship is a complex area for tax purposes. A company can get a tax deduction for payments to sponsor charitable activities if they are also made for the purpose of the company. This might be a payment to get publicity for the company or its products that can be regarded as a reasonable value for the amount paid. The position will depend on the facts in each case.
Companies should contact their tax advisers or their tax office for advice.
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Agreeing to run a Payroll Giving scheme for its employees or to re-promote an existing scheme is an excellent way for companies to help. The costs of setting up a scheme and the modest ongoing costs of running a scheme are deductible for tax purposes.
More information on Payroll Giving...
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There are many ways your charity can benefit from businesses. Use this template article to highlight the many techniques to your supporters, their employers and colleagues.
Giving by Businesses Template Article.
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