What are the Tax Implications if Local Charity Ask my Company for Donations?

Q. The Company for Which I am a Director has been Approached by a Local Charity to Make a Donation. The Charity is a School Attended by a Fellow Director’s Grandchildren. Is that Allowed? What are the Tax Implications?

A. HMRC list three conditions that, if satisfied, will disallow tax relief under what is termed ‘tainted’ donations. All three conditions are required for it to be a ‘tainted’ donation:

Condition A – the donation to the charity and arrangements entered into by the donor are connected.

Condition B – the main purpose of entering into the arrangements is for the donor, or someone connected to the donor, to receive a financial advantage directly or indirectly from the charity.

Condition Q. C – the donation isn’t made by a qualifying charity-owned company linked with the charity to which the donation is made.

Condition B is the condition that might impact on whether the donation is tax deductible. However, if it can be shown that no financial advantage is being gained by the donation (e.g. full school fees are being paid for the school child), then there is no financial advantage being received and the donation is allowed.


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