Companies making donations

Q: I am a director of a small limited company and want to make a donation to a local children's hospice. Can you advise me on the implications?

A: Assuming that the children’s hospice is a registered charity, your company will get corporation tax relief on the donation. To get the tax relief, the company simply makes the payment to the charity and deducts the amount as a 'non-trading charge' when working out its profit for corporation tax purposes.

Charitable donations cannot be used to create or increase your company's trading losses, and they cannot be carried over from year-to-year. So if you make a donation of more than your taxable profit, the excess is not tax effective.

Please note, if the company receives any benefit from the charity as a result of the donation, such as an advertisement in its newsletter, there are restrictions of the value of the benefit, in order that the donation still qualifies for relief.

Furthermore, there are different rules if you were to gift anything other than cash, such as land or equipment.

Commuting

Q: I operate my business from home and spend one or two days a week where my staff work. Can I count my travel costs as tax-deductible?

A: This depends on the address of your business. If the address where the staff are located, is where the business trades from, that address will be the business place of work. If you travel to that address, the cost would not be an allowable deduction for tax purposes as it would count as simply travel from your home to your place of work. This applies even if you do some work from home.

If, however, your home is the business address then travel to your staff would be allowable.

Structuring your travel costs tax efficiently can be tricky. So feel free to contact TaxAssist Accountants if you would like some advice regarding this.

Sponsorship

Q: My young boy plays in a local under 13s football team and they are looking for a new sponsor for next season. I run my own sole trade and would really like to pay for the strip and put it through the business. But can I get tax relief for it?
A: As you can imagine, this is a particularly ‘grey’ area of tax. To be an allowable expense, the sponsorship must be incurred ‘wholly and exclusively for the purposes of the trade’.

To try and make this as transparent and business-related as possible, you need to demonstrate that you hope the sponsorship will benefit your business. So for instance, there should be:

•an agreement in place, detailing things like:
◦what the team offers your business in return for the sponsorship (your name on their shirts, advertising around the pitch, attendance at their corporate events etc)
◦the size of the sponsorship
◦the duration of the sponsorship
•correspondence documenting the negotiation of the payments and terms
•evidence of how you found out about the opportunity to sponsor them
•evidence of your decision to choose them over the alternatives
•business plans
•details of how the sponsorship will be exploited (i.e. local media)
It’s not ideal that you had pre-existing knowledge of the team before the sponsorship or that your son plays for them. But if you can follow HMRC guidance and essentially treat the relationship, like any other business relationship, you stand a good chance of attracting tax relief against the sponsorship.

As this is such a murky area of tax legislation, please seek professional advice before entering into an agreement with the team.

Lloyd Stubbs specialises in managing tax and accountancy affairs for small business owners and can be contacted by phone or email

Tel: 01476 590555
lloydstubbs@taxassist.co.uk
www.taxassist.co.uk/grantham – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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