Gift Aid rules for companies
More and more, companies are placing doing good at the centre of their business culture. What kind of impact a company has on the world and how they publically stand up for values like inclusion and diversity is something they are judged on by their customers, workforce and increasingly, investors. This is particularly true of younger generations, as millennials are much more sceptical of the information they receive and the marketing they are exposed to, and consequentially are more likely to criticise brands if they do not live and breathe their values. It’s no wonder that over 90% of the largest companies now fill out sustainability reports.
At GoodBox, we are firm believers that being a good business leads to good business , and Gift Aid can be one of the best ways for your company to embrace corporate charitable giving. So, What is Gift Aid? Gift Aid is a tax relief scheme that allows charities to claim back the income tax paid by donors on their ‘gifts’. However, corporate Gift Aid works a little differently. When companies make donations to charity, instead of the charity claiming back the income tax, the company can get tax relief instead.
How does it work?
When a company donates money to a charitable cause, it can get tax relief on the donation by taking away the amount donated from its profits, consequentially paying less corporation tax. This is called Corporate Gift Aid and was put in place way back in 2000. Before this change, charities could claim Gift Aid on corporate gifts like they do with individual donations. The change was hoped to encourage companies to give more by adding an additional incentive to sweeten the deal.
To make a claim on a donation to a charity (or CASC), you simply need to set the amount paid against your profits in your Corporation Tax Self-Assessment (CTSA) and reduce your taxable profits to nil. This makes donating to charity even more appealing as a company – not only will you be donating to a good cause, but you will also pay less corporation tax. The system works in this way to encourage corporations to give more to charities, so there’s no reason why you shouldn’t integrate Gift Aid into your corporate fundraising. For charities or CASCs that receive donations from companies, you need to keep accurate records of any donations received. For more information, read our helpful guide on Gift Aid For Charities.
What doesn’t count?
There are certain Gift Aid rules for companies that restrict what counts as a qualifying charity donation. So it’s worth making yourself familiar with these beforehand so you don’t waste any time trying to claim back on payments which do not count. A payment does not qualify as a donation if it is:
- A dividend or distribution of profits
- Subject to a condition such as a repayment
- The company receives a benefit which is more than the value of the payment
- Dependant upon or part of an arrangement for the charity to acquire property that isn’t a gift from the company (or a connected person)
- Made by a charity or CASC
As well as donations to charities, companies can also claim corporation tax relief for gifts of shares that are outside their own company, as well as land and property that are made to a charity. You can also claim tax relief if a gift is sold to a charity at less than the market value.
Payroll Giving is a simple way of donating money to charity on a regular basis without paying tax on your donation. This type of fundraising scheme is used by companies to help their employees donate more to good causes on a regular basis. It works by deducting a certain amount off your salary every time you get paid before you are taxed (but after National Insurance). Unfortunately, you cannot claim Gift Aid on payroll donations, but it is certainly worth investigating schemes like this as a way to help your workforce raise more for charity.
Office sport days, sponsored pub quiz nights and wacky fancy dress are all well-loved ways to raise money at work for charity. But when it comes to fundraising at work, what can be claimed back by charities using Gift Aid? The general rule of thumb with Gift Aid is that donations have to be completely voluntary and optional in order for the gifts to be eligible.
When your coworkers _have_ to make a donation – whether it’s to participate in an egg and spoon race or buy a slice of flapjack – this is not viewed as donations made out of freewill. Because of this, HMRC does not view them as eligible for Gift Aid. But this doesn’t mean you should completely change your fundraising idea, it’s simply something to keep in mind. For more unique office fundraising ideas, check out our blog Forget Dress-down Fridays, It’s Time For Fundraising Fridays.
Charity or CASC-owned companies
Often, charities can have subsidiary companies that carry out trading activities which as a charity they cannot do, such as selling clothes in a charity shop. In these instances, a child company can set up a Gift Aid arrangement with its parent charity. This basically is an agreement that states that the child company agrees to pay a sum of money equivalent to some or all of their taxable profits to their parent charity. By estimating your expected corporation tax profits, you can make a qualifying donation to your parent charity based on your estimate, as long as you reduce any corporation tax liability to nil.
Where GoodBox comes in
When it comes to transforming how organisations fundraise, we don’t just talk the talk. If you didn’t already know, we are a Tech for Good company. This means we help charities and companies better connect with donors and causes using the latest technology. To do this, we continuously invest resources into research and product development to ensure that our contactless donation devices and digital fundraising solutions are at the cutting edge of technological excellence. So whether you’re looking to embrace the benefits of Gift Aid, modernise your fundraising at your annual gala, or turn your CSR policy into reality, with GoodBox you can ensure your fundraising is not only compliant but effective and impactful.