Paying charity from LTD company and from oneself.

[Ali123]

Hi All,

I am in the process of picking a charity and paying regular payments to them on a monthly basis, from the business account which is a limited company.

From my understanding, correct me if I am wrong, gift aid does not apply to companies as limited companies.

So if I donated £100- to the charity, this £100 could be used as an expense against the profits of the company. Is this correct?

I also want to pay charity but under my name. Does paying gift aid on it compulsory? or could it also be offset against tax on self assessment? If it cant it doesn't matter, however I would just like to know. Do I still need to report it on self assessment when paying charity?

Could someone please confirm if I understood this correctly and advise accordingly.

This is much appreciated.

Thanks

 

[Caspar]

If as a company you donate to a national charity any donations through the P & L account are added back in the tax comp as a disallowable expense.

If as a company, you donate to a local charity, as you have a business interest for doing so, (say they give recommendations to potential new customers for you, or advertise you as a sponsor locally), then this is an allowable expense in the P & L and is not added back in the tax comp.
Caspar

 

[David Griffiths]

If as a company you donate to a national charity any donations through the P & L account are added back in the tax comp as a disallowable expense.

No they aren't. They are a fully deductible expense for corporation tax.

 

[Caspar]

Thanks for that David. I did explain it in a bad way which was misleading, my apologise.

I do however understand it, that in a Ltd Co, although a donation to a small local charity is deductable against trading profits, a donation to a national charity is NOT deductable against trading profits, and is added back early on in the tax comp, if it has been deducted as an expense in the P & L. However, the national donation IS indeed deducted further down in the computation when calculating corporation tax.

If someone is a sole trader again the local charity donation can be deducted against trading profits but the national donation is added back to the profits if it has been added as an expense, but will be relieved by extending the owners basic rate of income tax.

Caspar

 

[David Griffiths]

Not the way that I understand it . Frstly there is no distinction in the rules between local and other charities. Secondly the deduction for any charitable donation by a company is by way of deduction from trading profits, provided that the donation does not create or increase a loss - it would be added back in the computation to that extent.

All of that is included in the link that I gave. I can't see anything in there to back up your view. Our office reference material is the same as the HMRC page

There can be a grey area between donations and advertising. In many cases the charities actually sell advertising space in programmes for event. I treat that as normal advertising costs, although the distinction is academic.

The only issue would be a sole trader who gift aids the donation - in that case it has to go through drawings and be reflected in the personal return

 

[Chris Smail]

That was when charitable donations were a charge in income, not an allowable expense. I think you are going back 30+ years.