As a self-employed worker, there will be a number of expenses that you will be able to claim back on, all of which will reduce your tax bill at the end of the year.
Donations to charity
If you want to make a donation to a charity and you own a business, you can choose to do this as either a personal or company contribution, but it’s worth knowing that these two methods work very differently when it comes to tax relief.
Making a personal donation
Making a donation to a registered charity through your personal income will mean being able to opt in for the Gift Aid scheme.
By ‘opting in’ and ticking that Gift Aid box, you are telling HMRC that you are a UK taxpayer who has paid enough tax and that your chosen charity are able to reclaim an additional 25% tax on the figure you’ve given (if this is not the case then that 20% will be reclaimed from you).
You will need to make a Gift Aid declaration, which will usually involve the charity asking you to fill out a form and you will also need to ensure that you include any donations that you have made in your self-assessment tax return.
Making a donation through your company
If you decide to make a donation via your company, then this may be allowable against corporation tax, however, in order to gain the relief on the donation, you need to ensure that the amount doesn’t cause the business to make a loss.
There will be certain situations whereby these types of payments don’t qualify. For example you cannot deduct payments:
- That are loans that will be repaid by the charity
- That are made on the condition that the charity will buy property from your company or anyone connected with it
- That are a distribution of company profits, such as dividends
- For any benefits you are given in return for your donation (tickets to an event etc.) they must be below a certain value, as demonstrated below:
||Maximum value of benefit
|Up to £100
||25% of the donation
|£1,001 and over
||5% of the donation (max £2,500)
Whether it’s for the annual Christmas party or a summer BBQ to keep morale strong among staff, you are able to claim back on events such as this, as long as you meet certain conditions:
- Every member of staff must be invited to the event
- You will need to ensure that the cost of each person does not exceed £150 – going above this amount will mean that any costs are then subject to tax and NIC
- If you wish to include your employees’ partners with these events, you can still claim tax relief, just as long as the total figure does not exceed £150 per person attending.
It is worth pointing out that should you wish to have more than one annual event a year, you will need make sure that the total claim for all of these combined, doesn’t exceed the £150 per head rule.
When entertaining business clients, you can claim the costs through the company, but they are not allowable against Corporation Tax and so you will need to consider whether or not it is worth it.
If by treating clients to a form of ‘entertainment’ it could very well result in extra business coming your way and them signing another contract in the future, this hospitality would be seen as being a benefit to your company.
If providing a gift to a client, in order for it to not be liable for tax you will need to ensure that it isn’t food, alcohol or vouchers that can be exchanged for such items, it can’t be more than £50 per person in each tax year and you will need to clearly advertise your company on the gift.
You must be able to show that the costs for any sponsorship have been made wholly and exclusively for the benefit of your business in order to claim as an expense.
Payments will qualify as a business expense if the charity you are sponsoring does the following:
- Publicly supports your products or services
- Allows you to use their logo in your own printed material
- Allows you to sell your goods or services at their event or premises
- Links from their website to yours
HMRC will question the sponsorship should they be a personal friend or relative, have any previous personal involvement with your business or if the sponsorship shows to have no commercial benefit to the company.
If you still have any questions or would like to discuss how Dolan Accountancy can help you and your business, please call Sophie on 01442 795 100 or email firstname.lastname@example.org.