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 and can also claim Gift Aid (25p for every £1 donated, reclaimed from HMRC)

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 EU/EEA charity that meets the equivalent requirements (note: post-Brexit, EU charity rules may have changed — check current HMRC guidance)
2. Made to a Community Amateur Sports Club (CASC) — these also qualify
3. A genuine donation — not a payment for goods or services
4. 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

Gift Aid and Corporate Donations

When individuals donate through Gift Aid, the charity reclaims basic rate tax from HMRC, and the donor can claim higher rate relief. For companies, it works differently:

How corporate Gift Aid works

1. Your company pays the full gross amount to the charity
2. The company claims full corporation tax relief — deducting the donation from profits
3. The charity can also claim a Gift Aid supplement of 25% from HMRC

This means a £1,000 company donation actually gives the charity £1,250 (£1,000 from you + £250 Gift Aid from HMRC), while costing your company as little as £750 after CT relief at 25%.

Gift Aid declaration

For the charity to claim Gift Aid on your company's donation, they may ask you to complete a Gift Aid declaration. However, for company donations, the charity can claim Gift Aid automatically — they just need to confirm the donation came from a UK company paying corporation tax.

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 publishes thresholds:

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
• The amount in Box 305 is deducted from total profits at Step 6 of the corporation tax computation
• 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 the compliant iXBRL accounts and 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 and Community Amateur Sports Clubs (CASCs) 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?

Companies pay donations gross (the full amount). The company claims corporation tax relief by deducting the donation from profits. The charity can also claim a 25% Gift Aid supplement from HMRC. So a £1,000 donation effectively gives the charity £1,250 while costing your company as little as £750 (after 25% CT relief).

Where do I report charitable donations on the CT600?

Enter qualifying donations in Box 305 of the CT600. The amount is deducted from total profits at Step 6 of the corporation tax computation. 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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