It’s Volunteers Week this week, a time when the UK celebrates the heroes and heroines – many of them unsung – who make a difference by giving their time free of charge.
However, did you know there are advantages to getting involved in the voluntary sector as the owner or manager of a limited company?
For example, you may not be aware that charitable donations are allowable for tax, reducing your taxable profit in the same way as regular business expenditure.
Other options to consider include:
Donations are deducted from taxable profit in the same way as any regular business expenditure. However, bear in mind loans don’t count and, if your company is given anything in return – tickets to an event for example – their value mustn’t be above a certain amount.
Donating company equipment or stock
The cost of any donated equipment or company stock counts as a capital allowance. Examples include office furniture, computers, vans and cars or even tools and machinery. For tax purposes, a donation of stock is classed as a sale at £0.00; the expense appears as usual in the limited company’s profit-and-loss account but there is no corresponding sale. If VAT would normally be applied, the donation can be zero-rated so there’s none to pay. However, the VAT on the purchase of the stock is reclaimable as normal.
Donating land, property or shares
Selling shares of the limited company to a charity doesn’t bring any tax breaks but sales of land, property or shares in another company are exempt from Capital Gains Tax. If the sale is a gift at less than market rate, the market value of the gift (not the land, property or shares) can be deducted from taxable profits.
If an employee is seconded to a charity, the costs of the employment of that individual are still deductible as a business expense against taxable profit. In other words, although they may be absent from the office, for tax purposes, it’s as though they’re still there.
Sponsoring a charity
As with donations, sponsorship of a charity is deductible from taxable profit in the same way as business expenditure.
The charity’s options include public support for the company’s products or services while the company may wish to use the charity’s branding or logo on its letterhead, website or printed material. The company may also be invited to the charity’s public events, enjoy some representation at the charity’s offices and also benefit from mutual online links.
If you have any other questions or would like to know more, feel free to contact us by emailing firstname.lastname@example.org or call the office on 01423 567499.