Is It Possible to Donate to Charity through My Business?
Every company owner is concerned with expanding sales and profits, but it is also essential to give back from time to time. As you develop your business further, there will come times when you will feel motivated and generous enough to contribute a fair sum to a charity or foundation of your choice.
In case you're wondering, yes, you may give to charity as a single trader, a partnership, a limited company, or even through your business. However, depending on your business structure, the discussion about corporate tax benefits from gifts may differ.
Here are some examples of how you can donate to charity through your business:
Donating as A Limited Company
A limited corporation is a legal entity distinct from its owners. This organisation can deduct money contributed to charity from its taxable earnings, saving the business corporation tax. Genuine donations are necessary for this, with no expectation of receiving anything in exchange for your generosity.
Thankfully, donations do not have to be monetary. A limited business can also contribute equipment, trading stock, real estate, shares in another company, and sponsorships. Each has its own set of restrictions and limits, depending on whether the payments are recorded as business costs in the company's books or just at the corporation tax return stage. Furthermore, donations from limited companies may even go to community organisations such as amateur sports clubs.
Donating as Sole Traders, Partners, or Directors
Donations from your business bank account are considered personal donations for sole traders, partners, and company directors because you and the firm are deemed a single legal entity. However, donations will not save you any company tax, as you'll have to deal with tax returns. This should be observed by both low-dividend company directors and higher-rate taxpayers.
Before tax-related issues arise, seek professional advice from accountancy services. Remember that everything must be documented. Most charities issue an annual statement or summary, which you must preserve to support your tax return statistics. You can also claim the difference between your tax and the base rate for the value of your gifts.
If you contribute through payroll, you must do it through a Payroll Giving plan established by a Payroll Giving Agency, and it can only be to a charity, not a community group. Furthermore, because the gifts are made before tax, you cannot claim a tax deduction for Payroll Giving.
And similar to limited companies, individual donations are not limited to money. You may also opt to contribute land, property, or shares or leave money in your will.
Absolutely anyone can make a charitable donation through their business, and its process is a lot easier than initially perceived. With the support of your team, you can even make goals to raise charitable funds annually!
In other words, go ahead and don’t hesitate to give back to your favourite organisation. Don’t just be recognised for your success, but also be admired for your generosity. Every ounce of help could go a long way, especially in times of crisis.
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