Charity Archives - Grunberg & Co

Why your SME should make charitable contributions: A tax perspective

admin — Tue, 07 Nov 2023 15:28:30 +0000

Charitable giving can bring tangible tax benefits for small to medium-sized enterprises (SMEs).

Understanding the tax implications and advantages of such donations can be an effective part of a company’s financial strategy.

When an SME donates to charity, it can claim tax relief by deducting the value of the donations from its total business profits before paying tax.

This applies to various forms of donations including money, equipment, or stock (trading goods), land, property, and shares.

Which donations could benefit your business?

Monetary donations are the most straightforward, however, and can be made in the form of cash, cheque, direct debit, or any monetary form.

To receive tax relief, the donation must be made to a charity or community amateur sports club (CASC) recognised by HM Revenue & Customs (HMRC).

It’s important to keep records of all donations as evidence for tax relief claims.

If you donate equipment, like computers or machinery you use in your business, to a charity or CASC, you can claim full capital allowances.

For donated stock, you do not include anything in your sales income for the value of the donation, effectively providing relief on the cost of the goods.

It is important to note, however, that these donations must be deducted at cost, not at the sale price, hence there will be no taxable profit on these items.

Another form of donation is land, property, or shares in another company.

Here, you won’t have to pay Capital Gains Tax on the land, property, or shares you donate, and you can deduct the market value of the donation from your business profits before tax.

Additional benefits of charitable donations

In addition to direct tax relief, engaging in charitable giving can also bring indirect financial benefits.

It can enhance your business’s reputation in the community, which may lead to an increase in customer loyalty and potentially attract a new customer base who value corporate social responsibility.

This can translate into increased revenues that far outweigh the cost of the donations.

Moreover, partnering with a charity can provide networking opportunities with other businesses and stakeholders.

This could lead to mutually beneficial partnerships, collaborative projects, or new business ventures.

It is also a point of differentiation in a competitive market.

Consumers and businesses alike are increasingly looking to engage with socially responsible businesses, and demonstrating a commitment to societal issues can set an SME apart from its competitors.

From an internal perspective, charitable initiatives can have a positive impact on employee engagement and morale.

Employees tend to feel a sense of pride and loyalty to an employer who shows a commitment to the wider community and may even wish to get involved in charitable activities themselves.

This can increase productivity, lower staff turnover, and make your business a more attractive proposition for prospective talent.

SMEs should be aware that there are limits and rules governing charitable donations.

For instance, the donation should not be a ‘payment’ where the company receives something in return from the charity, such as goods or services and the value of any benefits received from the charity must be below certain limits.

Is it worth it?

To conclude, charitable donations can play a significant role in tax planning for SMEs.

The direct tax relief on profits and no liability for Capital Gains Tax, coupled with the indirect benefits of enhanced reputation, networking, and employee satisfaction, make charitable giving a smart strategy for businesses looking to maximise their financial efficiency while contributing to society.

You should always consult with a tax professional to ensure that your business takes full advantage of the available tax reliefs and adheres to all the relevant rules and regulations.

For tailored advice on maximising your tax efficiency through charitable donations, please contact one of our team.

The post Why your SME should make charitable contributions: A tax perspective appeared first on Grunberg & Co.

Charities lose £3.6 million to fraud during pandemic

admin — Tue, 20 Oct 2020 16:43:48 +0000

More than 645 charities have become a victim of fraud during the coronavirus pandemic, a major study has revealed.
The figures were published by the Charity Commission for England and Wales during Charity Fraud Awareness Week – the annual event designed to help not-for-profits strengthen their defences against crime and fraud.
According to the report, hundreds of criminal attacks against charities have cost the sector some £3.6 million in losses since the start of the pandemic in March.
However, the “true scale of fraud against charities is believed to be much higher, as fraud is known to be underreported”, said the Charity Commission.
So, why is charity fraud increasing?
The regulator believes that remote working, and the resulting virtual activities and sign-off processes, is enabling an environment beneficial to criminals.
Fraudsters may also be extorting charities’ “tendencies to place goodwill and trust in individuals”. The Charity Commission highlights one example where a criminal used a story of “personal struggle” and financial hardship to pressure a charity into making a payment without carrying out the usual checks.
Fraud can be defended against with the correct financial controls, however. According to the regulator, two thirds of frauds are picked up by financial controls or audits, meaning simple checks and controls, together with a strong counter-fraud culture, can be “key to disarming fraudsters”.
Speaking at the 2020 Charity Fraud Awareness event, Helen Stephenson, Chief Executive of the Charity Commission, said: “We are seeing evidence that opportunists may be taking advantage of charities during the pandemic and I urge all charities to be extra vigilant against fraud.
“This comes at a time when charities are a lifeline for many people suffering from Covid-19, and the wider impacts of the pandemic – charities have been at the forefront of responding to the crisis, and many have also been placed under severe financial strain. As our country faces another challenging point in the crisis, we cannot afford for charitable work to be disrupted by criminals.
“When fraud hits charities, its impact is felt far beyond the balance sheet – it is people that are let down, often hard-working volunteers or people in desperate need. That’s why I’m urging all trustees to take action now, to protect their charity’s valuable funds and assets.”
For support and advice strengthening your financial controls, please get in touch with our expert team today.

The post Charities lose £3.6 million to fraud during pandemic appeared first on Grunberg & Co.

HMRC updates tax guidance for waiving income and bonuses and charitable giving

admin — Tue, 02 Jun 2020 14:30:56 +0000

HM Revenue & Customs (HMRC) has updated its guidance for people choosing to waive their income to support their business or a charity during the COVID-19 pandemic.
The move comes after research revealed that an increasing number of people were choosing to give up all or part of their income despite not understanding the tax implications.
What are the rules?
Employers, directors and employees have the right to waive their salary or bonuses, known as a “waiver of remuneration”.
In these situations, no Income Tax or National Insurance Contributions (NICs) will be due on the amount given up, providing it is not part of any wider arrangement to deliver the amount to a recipient or cause. For example, waived income would not attract liabilities if it was sacrificed to boost cash flow. But it would attract tax if it was waived on the condition that the sum would be donated to a particular charity.
It is also possible to return salary or bonuses after they have been paid. However, it is not possible to claim back Income Tax and NICs that have been deducted.
What about dividends?
Waiving dividends, meanwhile, requires a Deed of Waiver to be formally executed, dated and signed by shareholders and witnessed and returned to the company.
On dividends, the guidance states: “The waiver must be in place before the right to receive a dividend arises. For final dividends, this is before they are formally declared and approved by the shareholders. For interim dividends, the waiver must be in place before the dividends are paid.”
Employers, directors and employees can also choose to donate to charity under the Payroll Giving and Gift Aid scheme.
For help and advice, contact our expert team today.

The post HMRC updates tax guidance for waiving income and bonuses and charitable giving appeared first on Grunberg & Co.