Ltd Company Donations to Charity

Q: I am a director of a small limited company and want to make a donation to a local children's hospice this Christmas. Can you advise on the best way to do this?

Ellie, Norwich

A: Assuming that the children’s hospice is a registered charity your company will get corporation tax relief on the donation.  For small companies (profits below £300,000) the rate is 21% for the tax year to 31 March 2010. To get the tax relief, the company simply makes the payment to the charity and deducts the amount as a 'charge' when working out its profit for corporation tax purposes.

Unlike the gift aid scheme for individuals, your company will make the full payment to the charity. You do not need to deduct any tax from the payment and the charity does not claim back any tax on the donation it receives.

You are no longer required to provide a Gift Aid certificate to the charity or provide a new form of declaration, however it is recommended that you retain evidence of all the charitable donations made in the year.

If your company does not have a corporation tax liability in an accounting period where donations are made, there are special rules that determine how any loss created by the donation can be used. Your local TaxAssist Accountant can provide further details on this treatment.

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Limited Company Tax Advice from TaxAssist Accountants