Donating to charity and sponsorship
Charitable donations made from your Ltd Company to a registered charity are always a tax deductible payment. The charity enjoys 100% of the donation and your company enjoys 20% Corporation tax relief.
By making the donation through your company you are also avoiding having to draw the funds out of the company through a salary or a dividend payment and therefore not suffering an income tax or National Insurance charge.
Sponsorship is a little bit more tricky. Common sense must be used here to avoid the potential pitfalls and ensure that the payment is tax deductible.
Sponsorship is an allowable expense if it is purely for commercial reasons, for example; if you work mainly for large blue chip companies as a management consultant and sponsor a racing car which races all over the UK in a national championship then there is every likelihood that a potential client could see your sponsorship – it has commercial benefit and therefor this payment would be tax deductible.
However if we take the same management consultant and he sponsors his local village under 15s cricket team who coincidentally his son plays for, it would be very difficult to argue that this is a commercial benefit to the contractors limited company and therefore it would not be tax deductible. HMRC may also argue that the contractor is enjoying the benefit of this sponsorship and therefore a benefit in kind charge could be imposed on the contractor.
If you have any questions about donations to charity, sponsorship or any other expenses, please do get in touch today – always happy to answer your questions.