Companies are entitled to tax relief for qualifying charitable donations made to charities. The donations are paid gross without the deduction of income tax. The donations are deductible from the company’s total profits in the year in which the donations are made. The amount of the deduction is limited to the amount that reduces the company’s total taxable profits to nil: the payment of a charitable donation cannot create or augment a company’s loss for tax purposes. This means that charities do not reclaim tax from HMRC in respect of company donations.

The rules on benefits offered to corporate donors are the same as the benefit limits for individuals.

In the case of a company owned wholly by a charity or a group of charities, the company is able to claim a tax deduction for Gift Aid payments made within nine months of the year-end. This avoids the need for a trading subsidiary company having to estimate its level of taxable profits and pay the required level of charitable donations before the year-end.

HMRC has published full guidance on Gift Aid for companies.