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Charity donations via the company
Written by Ray Coman
A donation made via a company to a UK registered charity can be deducted from profit for tax purposes. There has to be a gratuitous intent for the payment to be regarded as a donation. If the company receives a benefit in return the payment is not regarded in the manner of a donation.
Limited company owners are often pay no income tax. This is because the salary received is less than the personal allowance and the dividend does not give rise to income tax. In such cases, the charity could not obtain the basic rate tax relief from HMRC. A donation made via a company would obtain tax relief provided the donations are not more than taxable profits.
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Coman & Co. Ltd. is a firm of Chartered, Certified Accountants and Chartered Tax Advisers.
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Gifts which are paid personally are made net. HMRC pays basic rate tax to the charity.
For employees, national insurance is usually deducted from pay, whereas only income tax is refunded to the charity. Therefore, a chartable donation would be more tax efficient if made via a company where the taxpayer is liable to national insurance. Currently the rate of corporation tax is the same as basic rate income tax. However, the rate of corporation tax will be lower than the basic rate of income.