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Charity Donations

New research shows that the more SMEs give to charity, the better their business performs. On average, SMEs give 1.8 per cent of their turnover, equivalent to £32,000 a year. SMEs that give more than 0.5 per cent turnover are 20 per cent more likely to see an increase in profits, twice as likely to report benefits to company reputation, and almost 50 per cent more likely to improve recruitment and staff retention.

Not all SMEs are aware of the benefits, with one in three SMEs (30 per cent) avoiding charitable giving because they fail to see any benefit. But, there is hope – 44 per cent of SMEs would give more if they saw a direct benefit.

Your limited company can pay less Corporation Tax when it gives money to a charity or community amateur sports club (CASC).

Benefit limits

If someone from the donating company receives a benefit from the charity in return for the donation (eg, tickets to an event), this must be below a certain value if the company wants to claim corporation tax relief. The limits are:

•donation of £0 – £100: 25% of the donation or less;

•donation of £101 – £1,000: £25;

•donation of more than £1,000 – 5% of the donation (up to a maximum of £2,500).

These limits also apply to benefits given by the charity to any person or company connected with the donating company, including close relatives.

Sponsorship payments

If the donating company as a whole receives a benefit from the charity for its donation, this counts as a sponsorship payment. The company can deduct sponsorship payments from its business profits before its pays tax by treating them as business expenses. Payments qualify as business expenses if the charity:

•publicly supports a donating company’s products or services;

•lets the company use their logo in company printed material;

•allows the company to sell its wares or services at their event or premises;

•links from their website to the company’s.

For more details on charitable giving visit the HMRC website here