Tax effective giving for companies

We are delighted to set out below the main ways in which business can support our work in a tax-efficient manner.

The various ways of donating include:

  • Making a cash donation
  • Donating shares, land or property
  • Donating items of equipment or stock
  • Secondment of staff
  • Sponsorship
  • Payroll giving

Make a cash donation

As a business your client can get tax relief when you make a donation of any amount, whether as a one-off or regular donation. They make the donation as a Gift Aid payment and classify it as a charge on income when calculating corporation tax liability. They do not need to deduct any tax from the payment and there is no need to complete a Gift Aid Declaration. The amount of tax relief they receive will depend on their tax rate. We, as the recipient charity, cannot claim any tax back.

Sole Traders

If your client is trading on her/his own account s/he can make a charitable donation under Gift Aid as any tax-paying individual would. They complete and sign a simple Gift Aid Declaration form and return it to us with their donation. This will cover all future donations they make to the Foundation, without the need to sign any further forms.

Partnerships

Any gift made by a partnership is treated as being made by the individual partners, in equal amounts, unless otherwise specified. The Community Foundation will claim back the basic rate tax from the Inland Revenue and the individual partners, if they are higher rate taxpayers, can claim a rebate accordingly. If one partner has power (under the partnership agreement or other document) to sign on behalf of the partnership they can do so. If not then each individual partner will need to sign the form. We are happy to provide a special Gift Aid Declaration if you let us know how many signatures you will require.

Example
A sole trader, John, makes a gift of £10,000. By completing a Gift Aid declaration form, the Community Foundation is able to claim a further £2,500 from the Inland Revenue. As a higher rate taxpayer, John can reclaim 18% of the gross gift through his annual tax return {the difference between higher rate tax at 40% and basic rate at 22% - maintained for the purposes of giving to Charity - £2,300. A gift worth £12,500 to East London Community Foundation has, therefore, only cost John £7,700.

Gifts Of Shares, Land Or Property

Businesses can get tax relief for gifts to charities which are “qualifying investments.” This is in addition to the relief companies can claim when calculating capital gains. Companies can claim this relief if they donate a qualifying investment or sell it, to a charity, at less than market value. A company cannot, however, get tax relief on the gift of its own shares. Qualifying investments include shares or securities that are listed or dealt in on a recognised stock exchange including:

  • Units in a UK authorised unit trust
  • Shares in a UK open-ended investment company (OEIC)
  • Holdings in certain foreign collective investment schemes
  • Certain interests in offshore funds
  • Land or property in which you have a qualifying interest

The amount which can be deducted is:

  • The full market value of the shares, securities or property on the date of disposal
  • Any incidental costs incurred in transferring the investments (broker’s or legal fees etc)
  • Less any disposal proceeds or other money, or the value of any other benefits, that the donor or a person connected with the donor (i.e. relative) received in consequence of the disposal

Donations and disposals of land or property require gifting of the whole of a company’s interest in the land or property, not just a share. If there are two or more owners, all must dispose of their interest to us for any of them to be able to claim relief.

Gifts Of Equipment Or Trading Stock

Donations of a product manufactured by the company, or machinery or plant may be eligible for relief if the company is a trading company, a sole trader or a
trading partnership. If a company donates machinery or plant used in the course of its trade, it is treated as having been disposed of at nil value for capital allowances (as opposed to market value as would otherwise be the case).

Staff Secondment

East London Community Foundation would welcome company support through secondment of a company’s member of staff to work with us for a period of time. In these cases, the Company is eligible for relief for the employment costs that they continue to incur which are then classifiable as a business expense when calculating chargeable profits for tax purposes.

Sponsorship

There will be many opportunities for sponsorship as the work of East London Community Foundation expands. These may include sponsoring individual members of our staff, our offices, pages on our website, publications, events, events and workshops in the community and with professional advisors and donors.

Provided sponsorship payment is made wholly and exclusively for the purposes of the company’s business, the sponsoring company can claim relief by deducting the payment when calculating its trading profits 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 work with their tax advisers or their tax office for detailed advice.

Payroll Giving

An unlimited amount can be contributed through payroll giving. Payroll schemes are straightforward to run and provide your employees with a tax-efficient way of supporting the charities of their choice. Employees each decide how much they would like to give. This is then deducted from their salary before calculating Pay As You Earn (PAYE) tax. Many companies which run Payroll Giving schemes also match their employees’ donations.

More information is available from HMRC

  • IR178 Giving land, buildings, shares and securities to charity
  • IR64 Giving to charity by business

by telephone on 0845 9000 404 or visit their site www.hmrc.gov.uk.

Should you wish to discuss making a gift to East London Community Foundation, please contact Anja Beinroth on 0300 303 1203.

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