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Markel Tax

26 Jun 2020

Charitable donations by companies

My client wishes to make cash donations to a UK registered charity from his personally owned building company, is tax relief available on those donations?

The company may be entitled to tax relief for its donations, provided it is a qualifying payment to a charity. A ‘charity’ for these purposes is defined within s 202, CTA 2010; however as a rule of thumb, charities registered in the UK or a relevant territory will generally meet the definition set out in s 202.

In order for the payment to be qualifying it must meet the following conditions as set out in s 190, CTA 2010:

  • The payment must be of money,

  • There must be no conditions as to repayment,

  • The company making the payment itself is not a charity,

  • The payment must not be conditional on, associated with, or part of an arrangement involving an acquisition of property by the charity from the company or a person associated with it,

  • The payment must not be a distribution,

  • If the company, or any person associated with the company, receives associated benefits in relation to the donation, the benefit must not exceed certain limits.

Assuming that all of the conditions above are met, the company will be entitled to a deduction against its total profits after applying all other reliefs available to the company, except group relief and group relief of carried forward losses; but deductions for qualifying charitable donations cannot reduce the company’s total taxable profits below nil.

Qualifying charitable donations may also be surrendered for group relief and should be done so in priority to other losses to avoid relief for excess donations being lost. If you are considering a charitable donation, making it through your company can be very tax efficient – a win for both the charity and the donor!

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