Meet our Expert

Tony_AustinTony Austin – Chartered Accountant

Tony is an accountant who has been involved with the not-for-profit sector for over 15 years. He was previously National Charity Tax Partner with a major firm of accountants and now works as an independent tax consultant, advising charities and donors on tax issues. He also writes and lectures on direct tax issues for charities and is a member of the Charities Tax Group. 

 

“A commercial film production company kindly wants to donate a small percentage of their forthcoming film’s income to our charity (assuming it generates income) and also nominate us as a beneficiary of the premiere. If they do so, are they able to offset the tax on either or both donated amounts?”

 

The answer

A limited company can deduct donations to charities from its total taxable profits for the year in which the donation is made (unfortunately, there is no tax relief if the company has no taxable profits as it cannot be added to tax losses).

The rules of Gift Aid apply but are different for companies compared to individuals. A donation by a company is made gross, there is no tax for the charity to reclaim and no Gift Aid declaration is required. It must however be a donation of money and anything received by the company as a consequence must be of a value to the company that is within the normal Gift Aid benefit limits. A benefit can include any publicity or advertising given by the charity or anyone else as a consequence of the donation, even if not requested by the company.

HMRC accept that an acknowledgement of the donation is not a benefit of any value, even if it includes the company logo provided it is reasonable and does not constitute advertising the donor’s business or product. On the other hand, there is nothing to stop the company itself advertising the fact that it made a donation to charity.