Charity and sponsorship expenses via your company

VA

We all have causes close to our hearts, and if you are contracting through a limited company, you can factor in donations to charity as part of your overall tax planning strategy.

This guide explores how you can make tax-efficient charitable donations via your limited company.

Giving to charity – the basics

When you give to charity through your limited company, you will usually pay less Corporation Tax by deducting the value of your donations from your business profits.

The most you can deduct is the amount that reduces your company’s profits to zero. You cannot carry forward any excess to a later period.

You can claim tax relief in this way on various types of donations:

• Money
• Equipment and trading stock
• Land, shares or property
• Employees on secondment
• Sponsorship

In practice, you can donate more than your company’s profits, but you cannot declare trading losses on your tax return or carry over any remaining amount to your next tax return if you do this.

Monetary donations

Money given to charity by your limited company is generally tax-deductible. However, there are some exceptions.

You are not entitled to tax relief on payments that the charity will be repaying as a loan or donations made on the condition that the charity will buy something from your company.

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You will also not receive tax relief on any funds given to charity as a distribution of company profit, such as a dividend.

Remember, you cannot claim tax relief if:

• The donation is structured as a loan, which the charity must repay
• The donation is conditional on the charity buying something from your company or a connected person
• The donation is made as a distribution of profits, for example, a dividend

A charity may offer you something as a token of appreciation for your donation, such as tickets to an event or fundraiser. However, there are limits imposed on the value of such rewards:

Equipment and trading stock

You can claim full capital allowances on equipment that you donate to charity.

The donation you make must have been used by your limited company. For example, you might upgrade a company laptop and give your old one to a local charity for their use.

Other equipment that would qualify includes office furniture, company vehicles, and tools or machinery.

Trading stock is the term for products that your company makes or sells. You get tax relief on its value by not including it in your sales income if you give any of it to charity.

If your company is VAT registered, the treatment depends on what the charity does with the goods.

If they’re donated for the charity to sell, hire out or export, you can apply zero-rate VAT and reclaim the input VAT on your costs.

From April 2026, this zero-rating was extended to cover goods donated for direct use in charitable services too, though value limits apply. If zero-rating doesn’t apply, you’ll need to account for VAT at your normal rate.

Land, shares or property

You can claim corporation tax relief on any land, property or shares in another company (not your own company) which you give to charity. This works by deducting the market value of the donation from your profits before calculating tax.

If you gift land or property to a charity, there is a certain amount of paperwork involved.

You will need to obtain a letter from the charity that describes the land or property, specifies the disposal date, and includes a statement confirming that they now own it.

You will also need to keep this documentation for at least 6 years.

If you offer to sell the donation at the charity’s request, you can still claim tax relief, but you must keep records to prove the charity asked you to do this.

Employees on secondment

If your limited company employs staff, you can temporarily offer their services to a charity and deduct the costs as a normal business expense. You will still need to pay them and deduct PAYE tax as normal.

Sponsorship

Sponsoring a charity is different from donating, as your company receives something in return for the payment.

For example, the charity might publicly endorse your products or services or include your company logo on its branded material and website.

As this clearly qualifies as sponsorship, the company can claim the cost as a legitimate business expense.

To support a corporation tax deduction, keep evidence of the promotional or advertising benefit to your company. This may include branding, links and mentions, or event exposure.

What about personal donations?

It is often simpler to make donations personally than through your company, especially if the amounts are relatively small.

By using Gift Aid, the charity can reclaim basic rate tax, so your donation is worth more to the organisation you’re donating to, without any additional cost to you.

Make sure you have paid enough tax in the year to cover the amount the charity reclaims from HMRC.

Not running a limited company?

If you’re running a business as a sole trader, there is no legal separation between you and your business, so all donations should be made personally via Gift Aid, not via your business accounts.

There’s a good article on ByteStart here which explains this in more detail.

If you have any questions about giving to charity through your business, you should seek advice from your accountant or HMRC.

You can read the official GOV.UK guide to charitable donations via your company here.

If you are considering a large donation or a season-long sponsorship, talk with your accountant first to make sure the payment is structured correctly and that you obtain the relief you are entitled to.