Forms of Support

There are many ways to help charities. Our advice is that you set up ways to help now, so that when an emergency happens you and your staff can act quickly. How can you help? Make donations, donate your time, organise an event, make a gift of your product or services.

 

Cash Giving

The Government wants to encourage giving, so there are various forms of tax relief available that boost donations at no cost to you or your staff.

 

Gift Aid - How Does It Work?

Gift Aid is a very simple and effective way for businesses to support charities. It applies to donations of money of any amount to UK charities. The way Gift Aid works depends on whether your business is a company, sole trader or partnership:

For Companies:
To give through Gift Aid, a company simply gives the money to charity. The company does not deduct any tax from the donation and does not need to make a Gift Aid declaration to the charity. Tax relief is given by deducting the amount of the donation from profits prior to calculating corporation tax. For further details about the effect of a donation on corporation tax liability, contact your company’s tax office.

Unlike Gift Aid donations from individuals, when a business gives through Gift Aid, the charity is not entitled to reclaim any tax against the value of that donation.

For Self-Employed:
Gift Aid donations from the self-employed (sole traders) are treated in the same way as Gift Aid by individuals. Therefore, the donation will be treated as paid out of taxed income and the charity will reclaim basic rate tax on it from Her Majesty’s Revenue and Customs (HMRC). The trader will be required to complete a Gift Aid declaration for the charity. A higher rate taxpayer can get relief on the difference between the basic rate and the higher rate of tax on the gross amount of the gift on his tax return.

For Partners:
Gift Aid donations received from businesses that are run as partnerships are treated as donations of equal amount from the individual partners, unless the partnership decides to split them in different proportions. The tax position will be as described for Gift Aid by individuals.

Unless one partner has power under the partnership agreement to make a Gift Aid declaration on behalf of the partnership, a Gift Aid declaration will be required from each partner. This can be done on one form provided it includes each partner’s details. (The position is different in Scotland where a partner may make a Gift Aid declaration on behalf of the partnership by simply showing the partnership’s name and address.)

Gift Aid - What Do I Look Out for?
There is no limit on the benefits given by a charity in return for companies that give through Gift Aid. However, for a “close company” (controlled by five or fewer people), partnerships and the self-employed, there are limits on the value of any benefits a charity may give in return. The limits are the same as those that apply to Gift Aid donations by individuals. For further details, please see HMRC Leaflet IR64.

 

Giving to Charity by Businesses

Gifts of Equipment or Trading Stock to Charity
Businesses can get tax relief when they give charities items manufactured or sold in the course of trade, or machinery or plant used in the course of trade.

 

Sponsorship Payments

Businesses who sponsor a charitable activity may be eligible for tax relief. Whether a payment qualifies for tax relief will depend on the facts. For example, a payment made to get publicity for your name or product, which represents a reasonable rate of return for the amount paid, will usually qualify.

 

Employee Secondments

Businesses that second employees to work for a charity on a temporary basis can deduct the costs incurred in connection with the employment, including salary, in calculating taxable profits.
For further details of charitable giving for businesses, view HMRC Leaflet IR64 – Giving to Charity by Businesses or contact Her Majesty’s Revenue and Customs, on their telephone helpline 0151 472 6056/6038/6055 or 0131 777 4040 (Scotland).

 

Payroll Giving

Did you know that nearly one third of companies that offer payroll giving to their employees have attributed improved staff retention to the scheme?

Payroll Giving - What Is It?
Payroll giving is a flexible scheme enabling employees to make charitable donations straight from their gross salary. This means that they receive immediate tax relief on the value of their donation. Therefore, for a basic rate taxpayer wanting to give a £10 donation, it will only cost £7.80 or just £6 for higher rate taxpayers.

For example:

Pledge Cost to Donor
(paying 22% tax)		 Cost to Donor
(paying 40% tax)
£100 £70.80 £60

Payroll giving - How Does It Work?

Very easily - payments are deducted straight from the employee’s salary either as a regular monthly payment or as a one-off gift. All the employee needs to do is choose how much they want to give to which charity or charities, and advise the payroll department. The money goes via a payroll giving agency (for a small administrative fee) to the designated charity or charities.

To download a free payroll giving toolkit for businesses, please visit www.givingcampaign.org.uk.

Payroll Giving - What Are the Benefits of the Scheme?

For Businesses:

  • Enhances Corporate Social Responsibility/Corporate Community Investment profile.
  • The Government has recently announced that it will provide small and medium-sized companies with a cash incentive for setting up a Payroll Giving scheme for employees.
  • Boosts employee morale and sense of team-building, and therefore can aid staff retention.
  • Aids recruitment (increasingly, graduate applicants ask about the social responsibility and ethical profile of businesses).
  • Complements existing volunteering or charity adoption schemes by offering employees a structured "no hassle" donation system.
  • Donations to the charities are administered by a payroll giving agency.

 

For the Charity:

  • Providing a reliable donation stream enables the charities to plan the expenditure level they can afford.
  • Donors are likely to continue giving for some time.
  • No administrative burden associated with processing donations.
  • Potential employer matching.

For the Donor:

  • Costs the donor less to give more to charity.
  • Payroll Giving is easy to set up.

 

Share Giving

Share Giving - What Is Share Giving?
Businesses who give shares to charity are entitled to claim tax relief by deducting the value of those shares from their profits for tax purposes. Companies can make a deduction from profits for corporation tax. For partners or the self-employed, details of the gift should be entered on your income tax self assessment return for the tax year in which the gift was made.

Any gains on a gift of shares to a UK charity are exempt from capital gains tax. (However, if the shares have fallen in value, the donor will not be able to use this loss to offset any other CGT liability).

Share Giving - How Does It Work?
Tax relief is available for shares and securities listed on the UK stock market, the Alternative Investment Market, and recognised stock exchanges overseas. It is also available for units in an authorised unit trust, shares in a UK open-ended investment company, and some similar foreign investments. However, a company cannot get relief for a gift of its own shares.

You can claim tax relief equal to the market value of the shares on the day you make the gift, together with any associated costs such as brokers’ fees. Tax relief can also be claimed on shares sold to charity at less than their market value. In this case, you can claim a deduction for the difference between the full market value and the proceeds you receive from the charity. In both cases, you should also take off the value of any benefit you receive from the charity in return for your gift.
Organisations such as Charities Aid Foundation or ShareGift can help you process this donation. Alternatively, you can give your gift of shares direct to the charity.

A company can claim relief by entering the amount in the “charges paid” box of your corporation tax self assessment return for the accounting period in which the gift was made.

For partners or the self-employed, deductions should be entered on your Income Tax Self Assessment return for the tax year in which the gift was made.

Gifts of Land/Property

Gifts of Land/Property - What Is It?
From April 2002, businesses that give real property (land or buildings) to charity are entitled to claim tax relief by deducting the value of the property from their profits for tax purposes. Businesses that are companies can make a deduction from profits for corporation tax. For partners or the self-employed, details of the gift should be entered on your income tax self assessment return for the tax year in which the gift was made. In addition, any gain on a gift of property to a UK charity is exempt from capital gains tax.

Donors are entitled to claim a deduction for the full market value of the property donated, less anything received in return.

Gifts of Land/Property - How Do I Do It?
You will need to:

  • Contact the charity you wish to give to and confirm their acceptance of the gift.
  • Transfer the gift to the charity.
  • Keep evidence of the gift, the date it was made and the open market value.
  • Claim the appropriate tax deduction.
  • Be aware that if you receive any benefit as a result of making the gift, this will reduce your tax relief.

 

Charitable Trusts

What is a Charitable Trust?
A charitable trust or foundation is a legal entity which can be set up by any organisation or individual who has decided that they want to commit to setting aside some of their assets or income for charitable causes. What’s more, charitable trusts can receive money through tax-efficient giving methods, such as using Gift Aid, payroll giving or share giving.

Employee Volunteering

What is Employee Volunteering?
Employee volunteering is a three-way partnership between the employer, employee and the receiver of these volunteers (in this case, a charitable organisation.) For each party there are clear benefits in getting involved. As an employer, implementing a successful volunteering scheme in the workplace can help develop skills and morale in the workforce as well as building important partnerships with business and the public sector.

Employee Volunteering - How Do I Set It Up?
For more information about setting up an employee volunteering scheme you can access the Volunteering England website at www.volunteering.org.uk. For a list of company volunteering case studies you can go to the Business in the Community Care’s website at www.bitc.org.uk/cares.