I just had a read of the HMRC pages on this and I'm now a bit confused as they're not confirming my belief that only donations to local registered charities are allowable for tax deduction purposes.
I think from scan reading the above the answer is yes but I've still got it in my m ind about they have to be local.
Off doing a bit more searching. Talk in a bit,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
After ten mins scouring the recesses of accountingweb I think that I understand where my confussion comes from.
Gift aid is ok for tax deduction purposes for any registered charity (see the restrictions in the HMRC links).
For small, local non registered charities, small (not yet sure what the definition of small is for this) amounts of donation can be expensed as advertising.
In chasing this information down I was also chasing after a copy of the withdrawn leaflet IR64 which led me to this index page that you might also find useful.
Right, now I really must get back to doing old exam questions on derivatives and hedge accounting.... As you might have guessed by my digging for the above, my feeling is that derivatives make tax seem fun!!!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Charitable donations to local charities to which the company would gain some benefit from eg in publicity are allowed, but donations to large charities eg oxfam arent allowed for tax puposes.
Not sure the reasoning why this is as i have always thought that giving tax relief to all charitable donations would encourage more donations but the law is the law as they say.
that was my understanding as well but after (scan) reading the HMRC links I'm no longer so certain about charitable giving being restricted to local charities.
My starting point was Marks position as that's what I've always believed as well. However, when I went off to HMRC to find the page that detailed it but there's just nothing there in relation to the restrictions that I for one and Mark for another have always believed to be the case.
I'm pretty sure that IR64 was the thing that I was looking for but all copies of IR64 material have been removed from the HMRC site and it now only appears as a "This has now been deleted" or "Link removed".
This sounds like something the Shiela would know all about. Fingers crossed she'll be on the site later to tell me where my understanding of charitable giving is going astray.
... Yes, I know, I'm finding any excuse to not be doing derivatives. Right I'm off to it now.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
... Yes, I know, I'm finding any excuse to not be doing derivatives. Right I'm off to it now.
Kind of like me and my daft idea with the pre-decimilsation balance sheets. Funnily enough, I did go ahead and do the first one from 1959. The next year is missing. Then they are all there apart from 1974 after that.
I've even re-started my ICB computerised course levels II and III after a gap of one year. Lucky I wasn't on one of those 180 day Sage things.
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Never buy black socks from a normal shop. They shaft you every time.
It's quite complicated and depends on many factors but the main one is our old favourite Wholley & Exclusively
Just an extract teh link to the source is below
BIM37500 - Wholly & exclusively: case law: subscriptions and donations
Remains a question of purpose
Donations and subscriptions are only allowable if they are incurred for the purposes of the trade and for no other reason. Many subscriptions and donations however are made from motives that are too general or personal to justify a deduction.
It does not have to be complicated. These are the questions I ask to decide if its allowable or not for a Ltd Co.
- Who is the actual beneficiary of the donation? This is not the name of the organisation, but the actual person (there has to be people) who will directly benefit from the money when it is spent.
If the money is to be used to help the donor, or anyone connected to the donor then its not allowable. (Being Volunteer for an organisation does not make someone a beneficiary!)
AND finally
- What does the company get out of it? If nothing - that's easy - allowable (a mention on a web site has little value so should not be considered a benefit!) however it there are any conditions attached then its unlikely it will be allowable unless the conditions are for a benefit which has low cash value to the donor based on the Benefit value limits set down by HMRC.
Ok, so Bill and Fraukes answer are quite different then. I would think that rarely would a donation be made for the purpose of trade, they are normally made because the owners have some reason to want to support a specific charity/group of charities, so on that basis most donations would be disallowed. But Fraukes answer is that it is allowable as long as you are not personally connected to the charity and don't receive any benefit, whereas Mark is saying you should receive a benefit for it to be allowable.
Conflicting opinions here!!
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
There is nothing to suggest it has to be a local charity Sponsorship and donations are two different things with different rules - sponsorship is more likely to include an advertising benefit Donations are tax deductible as long as you/your company doesn't receive a benefit over the benefit allowance amounts and you/your family are not connected to the charity
Interesting discussion though.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Marks comment used to be correct - because companies used to make contributions under "Gift Aid" and therefore paid tax on the contribution and the organisation (I'm not calling them a charity, as other organisations can be registered for gift aid/are included as you mention) would reclaim the tax paid. But company contributions are no longer made under Gift Aid - hence the change in rules!
-- Edited by YLB-HO on Thursday 26th of May 2011 03:12:53 PM
This sounds like something the Shiela would know all about. Fingers crossed she'll be on the site later to tell me where my understanding of charitable giving is going astray.
I know about receiving donations but not giving them!!! In order for a donation to be tax free to the receiver, it has to be given freely by the donor without the donor receiving any benefit.
The confusion comes from the tax systems source system (a.k.a the schedular system but officially we don't have schedules any more).
Where a donation is made to a small local organisation (or a registered charity) for advertising purposes wholly & exclusively in connection with the trade then the donation will be a trade expense.
Where a donation is to a registered charity but is not made wholly & exclusively for the benefit of the trade then it will be a non-trade charge.
Generally a payment to a registered charity is a NTC and a payment to, say, the local children football team is either a trade deduction if it can be argued as advertising (that's why the company logo goes on the shirts and the director presents the trophies...) or not allowable.
The end result is the same either way for a company that makes a profit although you need to fill in a few more boxes on the tax return (you show a higher trade profit and then knock it back down with a non trade charge to get back to where you started before you disallowed the donation).
If the company makes a loss, then a non-trade charge does not increase the loss and cannot be carried forward. If a company makes a loss and carries it back then the non-trade charge is also displaced (a carry back claim is all or nothing, so you can't restrict the carry back to profit after deduction of non-trade charges).
