CIC Association

Serving Community Enterprise

Donations from Companies

A donation to a CIC is unlikely to qualify for the same tax relief as one donated to a charity. However, I would still argue for full tax deductibility - simply under different more beneficial rules.

A donation to a charity by a company has its own special rules and gets treated differently to 'normal' trading expenses. Donations to national charities are treated as a Charge on Income (deductible but with restrictions) whereas a donation to a local charity is generally treated as fully deductible as a normal trading expense. One of the many pains in completing  company tax return is determining this split.

I would treat a 'donation' to a CIC as a normal trading expense (as a marketing-type expense). Luckily for businesses, there is no requirement for expenditure to have been spent efficiently. So a company can spend money on marketing (via a donation to a CIC), even if it results in very little actual benefit to them. It should still be tax deductible.

So the answer to your potential donees is "Treat it as marketing expense". This does assume that the donor is not connected to the CIC.

 

Donations from Self-Employed / Partnerships

This donation has to be paid gross and treated as a normal trading expense. CICs are not charities and cannot claim Gift Aid, meaning an individual also cannot claim Gift Aid on the payment.

 

Remember that (as a general rule) if it is tax deductible for the donor it is taxable on the CIC.

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Replies to This Discussion

Thanks, Alastair - that's a nice clear answer.

However your last point - do you mean that if the company donating the money as a marketing expense avoids paying £100 in tax, then we as the receiver of the donation have to pay £100 to HMRC ourselves?

Jane

Almost but not quite.

The donor will reduce their taxable income by £100; you will increase your taxable income by £100.

Whether you actually pay any tax will depend on whether or not you make a profit. And the donor and CIC could easily have different tax rates applying to them which is why I refer to the change in taxable income rather than an amount of tax payable.

Thanks again for the clarification.

Just out of curiosity - are you an accountant or just an extremely well-informed person?!

Best wishes,

Jane

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