HR & Management

Giving to charity: a business owner's guide

4 min read

12 September 2015

What are the ways that businesses can donate to charity in the most effective way?

Look around you. Is your office space cluttered with extra chairs? Are there budding bakers in your office? Is running half-marathons your CEO’s kinda bag? If so, think about how you can use these elements to do some good and donate to a charity.

Giving to charity should be something that every business considers doing. Charity donations – financial or otherwise – should always be with the greater good at heart.

There are bound to be businesses out there that align themselves with charities for public relations reasons, viewing charitable giving as a gateway to ensuring people’s affections whilst lowering the amount of Corporation Tax they pay. If this is your main reason for donating to the charity of your choice, stop reading now and rethink your reasons why.

Whether you choose to give a financial donation, donate equipment, stock or property, giving to charity is a brilliant thing to do, and far simpler than a lot of people think.
How do I give to charity through my business?

There are different rules depending on whether your business is a limited company or sole trader:

Limited company

If you wish to make a donation to charity via your limited company, you will need to keep the documentation surrounding the donation. Donations are classed as an expense and put through your accounts as Payment of Charitable Donation.

Making charity donations as a limited company lowers the amount of Corporation Tax you pay – see below for how this works.

Sole Trader

If you are a sole trader, or in partnership, then a donation to charity wouldn’t count as a day-to-day running cost of your business.

That means that, if you pay the money from your business’s bank account, you would need to record this transaction as “drawings”, or a non-business transaction.

But you may still be able to get tax relief on the donation, so long as you’ve made it under Gift Aid.

When you Gift Aid a donation, the charity can claim some money back from the government. This is the equivalent of basic rate tax on that donation – for example, if you give £10 to a charity under Gift Aid, then the charity will be able to claim an extra £2.50 back from the government.

If you are a higher-rate taxpayer, then you can claim tax relief on the difference between the basic rate tax relief the charity has already claimed, and the higher rate – so for your donation of £10, the charity could claim £2.50, and you would get £2.50 in tax relief, since the higher rate is 40% and the charity has already claimed 20% of that.

To claim this tax relief, you should record the donations in the main section of your tax return.

Need some inspiration? 

Many of the big name businesses donate to charity one way or another. Apple and Google both run a gift-matching program meaning that any employee who donates to charity (through a sponsored run or bike-ride for example) will have their contribution matched by the company. 

Smaller businesses help out via donating when purchases are made. For example Out Of Print Clothing donate one book to Books for Africa with every purchase made of their product.

Claire Beveridge is a writer and content producer for Crunch Accounting.