At some point, you may consider making charitable donations, either personally or through your company. Charitable giving has benefits both for the individual and businesses in the UK. To make a gift aid donation, follow these steps.
To qualify for Gift Aid, follow these steps:
- Declare that you want your gift treated as a Gift Aid donation.
- Ensure you’ve paid sufficient UK tax for the year to cover the Basic Rate Tax the charity will reclaim.
- Include your full name and address (or at least your house number and postcode) in the declaration.
Notifying HMRC of Gift Aid:
If you complete a self-assessment tax return:
- Include the gross total of all Gift Aid donations in the year or ask your accountant to do so.
- Offset Higher Rate Tax relief against your tax due for the current tax year or carry it back to the previous year.
If you pay Higher Rate Tax but don’t complete a self-assessment return:
- You can claim the additional relief by writing to the tax office with details of your total Gift Aid donation.
Gift to Charities Made by Companies:
- Companies can make donations to charities before tax is deducted from their gross profit.
- If the donation is an allowable expense, it reduces the company corporation tax due.
- From 15TH March 2023, the definitions of a charity for tax purposes have been changed so that only UK charities are eligible for charitable tax reliefs. This impacts EU and EEA charities particularly. If a company makes a donation to a non-UK charity after 15 March 2023, UK tax reliefs are only available if the charity has ‘asserted their UK charitable status’ previously with HMRC under transitional provisions which last until 1st April 2024. After April 2024, companies will not be eligible for UK tax relief on donations to EU or EEA charities.
- Keep documentation from the charity to support the payment made.
- Donations can’t be used to create a loss for Corporation Tax purposes.