There are endless charities out there that are always looking for donations to help people. If you are thinking of starting a limited company or own a limited company, you can offer such help to charities. It will improve the reputation of your company and feel rewarding to help others.

However, the best part is that, in many cases, charitable donations are also tax-deductible. Here is a complete guide to how HMRC taxes a company’s charitable donations.

Qualifying Factors Of Charitable Donations

Donations are not just about giving away money. They come in various forms, and HMRC qualifies these items as charitable donations:

  • Property or land
  • Company shares
  • Money
  • Sponsorship payments
  • Trading stock
  • Equipment
  • Employees

Giving away any of these items qualifies as a charitable donation in the eyes of HMRC. You can then claim tax relief by subtracting the number of donations from your profits before paying tax. However, there are rules you need to follow when it comes to these.

Donating Property, Land, And Company Shares

Donating these items may lead to a lower Corporation Tax. However, you can’t claim these deductibles on sales of shares in your company or gifts. The Government also suggests that you should contact the charity organization to ensure they will accept your gift before you donate.

Before claiming the deductible on these, you need:

  • Record of the date of sale or gift
  • A statement confirming the donation
  • Description of the item donated

Once you follow these, you can deduct the tax in no time.

Donating Money

When you donate money to a CASC (community amateur sports club) or charity organization, you can deduct the amount from profits before payment of Corporation Tax. Here are the following donations you can’t deduct:

  • Loans are given to charity with the expectation of repayment
  • Dividends
  • Monetary compensation given on conditions. For example, donating only if the charity organization buys from your company

Here are some rules you need to keep in mind before donating money to charity if you want to deduct tax successfully:

  • If you donate a hundred pounds, you can only accept 25% of the value of your donation from the charity
  • If you donate from a hundred to a thousand pounds, you can only accept a value of twenty-five pounds
  • If you donate more than a thousand pounds, you can only accept 5% of the value of your donation

You will only be allowed to deduct from taxes if you follow all these rules set out by the HMRC. It is essential to follow them flawlessly to ensure a smooth process of tax deduction.

Final Words

That was your complete guide to charitable donations and the requirements set by HMRC. If you plan on starting a limited company, you can ensure tax deductibles by following these methods. You can also contact Seed Formations for starting your company.

We deal with all UK company formations and help people build successful companies. For more information on our full range of solutions, please feel free to get in touch with us now.