Corporation Tax Relief on Charity Donations

Corporation Tax Relief on Charity Donations

Donating to charity through your limited company isn't just good for the cause — it can also reduce your corporation tax bill. Qualifying charitable donations are deducted from your taxable profits, which means every pound you give costs your company less than a pound after tax relief.

But the rules aren't always straightforward. Not every charity payment qualifies, the timing matters, and the way you report donations on your CT600 has specific requirements. This guide covers everything you need to know about claiming corporation tax relief on charitable donations in the UK.

How Corporation Tax Relief on Donations Works

When your limited company makes a qualifying donation to a registered charity, the payment is treated as a charge on income — it's deducted from your total profits before corporation tax is calculated.

This is different from how individuals claim Gift Aid. For companies:

• The donation is paid gross (the full amount, without deducting basic rate tax)
• The company gets full tax relief — the donation reduces taxable profits pound for pound
• The charity receives the full amount you pay

Example

Your company has taxable profits of £100,000 and makes a £5,000 donation to a registered charity.

• Taxable profits after donation: £95,000
• Corporation tax saving at 25%: £5,000 × 25% = £1,250
• Effective cost of donation: £5,000 − £1,250 = £3,750

At the small profits rate (19%), the saving would be £950, making the effective cost £4,050.

What Qualifies as a Charitable Donation?

Not every payment to a charity attracts corporation tax relief. The donation must meet specific conditions:

Qualifying donations

To qualify for relief, the payment must be:

1. Made to a registered charity — either UK-registered with the Charity Commission or an overseas charity that meets the equivalent requirements (HMRC publishes guidance on qualifying overseas charities)
2. Made to a Community Amateur Sports Club (CASC) — these also qualify
3. Made to a qualifying grassroots sport body — certain payments to eligible sport bodies also qualify
4. A genuine donation — not a payment for goods or services
5. Not conditional on receiving something of material value in return

Types of qualifying payments

Important distinction: donations vs. sponsorship

If your company sponsors a charity event and receives advertising or publicity in return (logo on materials, mentions in programmes, social media posts), HMRC treats this as a business expense, not a charitable donation. It's still tax-deductible — but as a normal trading expense, not a qualifying charitable donation.

The distinction matters because:

• Business expenses reduce trading profits (before the CT computation)
• Qualifying donations are deducted from total profits (in the CT computation itself)
• The end result on your tax bill is often the same, but the reporting is different

Corporate Donations and Gift Aid

Gift Aid is a scheme for individual donors, not companies. Understanding the distinction is important when your company gives to charity.

How Gift Aid works for individual donors

When an individual donates under Gift Aid, the charity can reclaim basic rate tax (25p for every £1 donated) from HMRC. Higher and additional rate taxpayers can claim further personal relief. The individual must have paid enough income tax or capital gains tax in the year to cover the amount the charity reclaims.

How corporate donations work

For company donations, Gift Aid does not apply:

1. Your company pays the full gross amount to the charity (no tax deducted at source)
2. The company claims corporation tax relief by deducting the donation from its profits
3. The charity receives exactly the amount you pay — there is no additional Gift Aid supplement on company donations

This is the critical point: a £1,000 donation from your company gives the charity £1,000. The tax benefit flows entirely to your company through the CT deduction, not to the charity through any HMRC reclaim. Charities have no mechanism to claim Gift Aid on a corporate donation.

What this costs your company

At 25% corporation tax:

• Your company pays: £1,000
• Tax saving: £250
• Net cost to company: £750
• Charity receives: £1,000

At the small profits rate (19%):

• Net cost to company: £810
• Charity receives: £1,000

Gift Aid declarations

Because company donations are not eligible for the Gift Aid individual reclaim mechanism, your company does not need to complete a Gift Aid declaration. Charities collect Gift Aid declarations from individual donors only. For your company's donation, the charity will simply provide a receipt.

If your company encourages directors or employees to donate personally from their own funds, those individuals can claim Gift Aid on their personal donations in the usual way — but that is separate from the company's charitable giving.

Gifts of Shares, Securities, and Property

Companies can donate more than just cash. Gifts of qualifying investments and land or property receive enhanced tax relief:

Shares and securities

If your company donates listed shares, securities, or units in an authorised unit trust to charity:

• The company can deduct the market value of the shares at the date of the gift
• Plus any incidental costs of making the gift (broker fees, etc.)
• No chargeable gain arises on the disposal

Land and property

If your company donates freehold or leasehold land or buildings:

• The company can deduct the market value of the property
• Plus incidental costs (legal fees, valuation costs)
• No chargeable gain arises

These are powerful reliefs — if your company holds appreciated assets, donating them can be more tax-efficient than selling them and donating the cash.

Equipment and trading stock

If your company donates physical assets (computers, furniture, stock):

• Equipment: The market value at the date of donation is deductible. Any difference between the written-down value and market value is handled through capital allowances (balancing allowance or charge)
• Trading stock: The market value is treated as a sale at nil consideration, and the cost of the stock is already an allowable trading expense

Restrictions and Limits

Unlike some other tax reliefs, there is no upper limit on the amount a company can donate to charity and claim corporation tax relief. However, there are important restrictions:

Connected charities

If the company and charity are connected (e.g., the company directors control the charity), the donation still qualifies for relief — but HMRC may scrutinise the arrangement more closely to ensure it's a genuine donation.

Benefit to the donor

If the company (or a person connected with the company) receives a material benefit in return for the donation, relief may be restricted or denied. Minor benefits (a thank-you letter, a small pin badge) are fine — HMRC applies the following limits:

For example, on a £500 donation the maximum permitted benefit is £25 + 5% × £400 = £45. On a £10,000 donation it is £25 + 5% × £9,900 = £520. The £2,500 cap is reached at donations of approximately £49,600.

If the benefit exceeds these limits, the entire donation may lose its qualifying status.

Donations cannot create a loss

Qualifying donations can reduce your taxable profits to zero, but they cannot create or increase a tax loss. If your company's profits are less than the donation amount, you only get relief up to the level of profits. The excess donation is lost — it cannot be carried forward or back.

This is a critical planning point: if your company has a bad year, consider reducing charitable donations or deferring them to a profitable period.

How to Report Charitable Donations on Your CT600

Qualifying donations are reported in specific boxes on the CT600:

CT600 reporting

• Box 305 (Qualifying donations): Enter the total qualifying charitable donations made during the accounting period. This covers donations to charities, CASCs, and qualifying grassroots sport bodies. The amount cannot exceed Box 300 (profits before qualifying donations and group relief). Do not include payments that are already deductible in calculating trading profits
• The amount in Box 305 reduces your profits chargeable to corporation tax
• If you've made gifts of shares, securities, land, or property, include the market value plus incidental costs

In your accounts

Charitable donations should appear in your profit and loss account, typically under "administrative expenses" or as a separate line item. In the corporation tax computation, they're then added back and separately deducted as qualifying donations — this ensures they're treated correctly for tax purposes rather than as a normal trading expense.

What if the donation is also a business expense?

If a payment is both a business expense (e.g., sponsorship with advertising benefit) and partly a donation, you need to split the payment:

• The commercial element (advertising value) goes through as a normal trading expense
• Any excess over the commercial value may qualify as a charitable donation

In practice, most small company payments to charity are straightforward donations without a commercial element.

Tax Planning with Charitable Donations

Timing your donations

Since donations can only reduce profits to zero (not create a loss), timing matters:

• Profitable year: Maximise donations to get full relief
• Loss-making year: Defer donations — you'll get no tax benefit from donating when there are no profits to reduce
• Marginal relief band: If your profits are between £50,000 and £250,000, the effective CT rate is up to 26.5%. Donations in this band provide the highest percentage relief

Monthly vs. lump sum

There's no tax difference between monthly donations and a single annual payment — both qualify for relief in the accounting period they're paid. However, budgeting regular monthly donations can help smooth your cash flow.

Year-end donations

Donations must be paid (not just pledged) during the accounting period to qualify for relief in that period. If you want to reduce this year's tax bill, ensure the payment leaves your company's bank account before the year-end date.

How Taxpipe Handles Charitable Donations

When filing your CT600 with Taxpipe, you'll be prompted to enter any qualifying charitable donations. Taxpipe automatically:

• Places the amount in the correct CT600 box (Box 305)
• Deducts it from your total profits in the computation
• Calculates the resulting corporation tax, including marginal relief if applicable
• Generates compliant micro-entity iXBRL accounts and tax computation iXBRL, then submits everything to HMRC

It takes minutes, not hours. See our pricing to get started.

FAQ

Are charitable donations tax-deductible for corporation tax?

Yes. Qualifying donations to registered charities, CASCs, and qualifying grassroots sport bodies are deducted from your company's total profits before corporation tax is calculated. The donation reduces your tax bill pound for pound at your effective CT rate.

Is there a limit on how much my company can donate?

There's no upper limit on qualifying charitable donations for corporation tax relief. However, donations cannot create or increase a tax loss — relief is limited to the amount of your taxable profits in that period. Any excess is lost.

How does Gift Aid work for company donations?

Gift Aid is a scheme for individual donors, not companies. When your company donates to charity, it pays the full gross amount and claims corporation tax relief by deducting the donation from its profits. The charity receives exactly what you pay — there is no additional Gift Aid supplement on corporate donations. A £1,000 company donation gives the charity £1,000, and costs your company £750 net (after 25% CT relief) or £810 net (after 19% relief).

Where do I report charitable donations on the CT600?

Enter qualifying donations in Box 305 of the CT600. This covers donations to charities, CASCs, and qualifying grassroots sport bodies. The amount is deducted from total profits and cannot exceed Box 300. Make sure the donations are also shown in your accounts and added back in the tax computation before being deducted separately.

Can I donate company assets instead of cash?

Yes. You can donate listed shares, securities, land, property, equipment, or trading stock. For shares and property, you can deduct the market value plus incidental costs, and no chargeable gain arises. This can be more tax-efficient than selling the asset and donating the proceeds.

What's the difference between a donation and sponsorship?

If your company receives advertising or promotional benefit in return for payment (logo placement, social media mentions), it's treated as sponsorship — a normal business expense, not a qualifying donation. Both are tax-deductible, but they're reported differently on the CT600 and in your accounts.

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