Giving to charity this Christmas

The festive season sees both large and small businesses showing their philanthropic side with charitable donations and awareness initiatives.

While the spirit of these enterprises is all about human generosity, the economics are a real factor too, and many businesses are unaware that they could be missing out on tax rules that could benefit both them and the charity.

Tax deductibles for limited companies

Limited liability businesses can reduce the amount of corporation tax required by deducting the value of the donation from overall profits before tax is paid. Businesses can also claim full capital allowances on the donation of equipment or trading stock, forgo capital gains and tax on land, property or shares and deduct business expenses for seconded employees working for a charity.

Sole trader Gift Aid

Sole traders can make a ‘Gift Aid Declaration’, which enables charities to claim an additional 25p for each £1 donated at no extra expense to the trader. While most types of donation are covered, some are exempt and the process requires the validation of the charity. Therefore, it’s worth contacting the charity directly about their Gift Aid status and application prerequisites before beginning fundraising.

Giving money the right way

Plan how to transfer money to the charity in order to maximise its impact. While agents and street collectors are a viable means, they are likely to require a commission, whereas a direct transfer to the charity will mean that the whole amount is received.

If you’re a small business owner looking for accounting advice this festive season, why not get in touch with our expert team today?