Donations to charities are always important, and a growing number of businesses (as well as individuals) are taking Corporate Social Responsibility very seriously. Small businesses are leading the way in supporting their communities and giving to charities.
To help you make donations now and in the future, here is a look at the ways in which you, your business and your employees can help charities to carry out their good work; and any implications it may have on your business.
There are also links to a number of worthwhile causes at the end of the article.
Individual Donations
You can make cash donations directly to charities in a number of ways, including over the phone, on the internet or by post. If you pay income tax then the charity you donate to will also be able to reclaim the tax from your donation (currently 28% at basic rate); providing you agree to let them do so.
Employee Payroll Donations
You can easily set up a payroll donation scheme, allowing employees to donate money from their pay before PAYE tax is deducted. This gives the employee tax relief at their top rate of tax, and means that an employee paying basic rate tax will be able to give £10 at a cost of just £7.80.
Once the money is deducted, you simply pay it to a government authorised Payroll Giving Agency, which charge a small fee (0-4%) to carry out most of the administration work and pass the money to the charity.
Many employers pay this fee on behalf of the employees; and these charges as well as any administration costs are allowed as a deduction against your profits for tax purposes.
If you choose to match or add to any donations made by employees, these are also deductible against tax.
You can choose a charity that you feel is worthwhile, but your employees must be free to donate to any charity they wish instead. They also have the right for the name of the charity they support to remain private if they wish.
Payroll giving is easy to start, and costs very little to run; whilst providing good benefits for charities and improving your businesses image. If you start a payroll giving scheme, then you need to tell your employees about it; many Payroll Giving Agencies will help you to do so, providing leaflets and information to allow employees to see the benefits.
Business Donations
One of the best ways to give your business a good image in the community is to make charitable donations to worthy local or national causes. Helping out social causes can often help to increase employee morale; and make people think more positively about your business.
There are 3 main ways for small businesses to make charitable donations, each of which benefit good causes without costing you more than they need to.
Financial Donations
This is a straightforward cash donation made by your business to a charity, which can be deducted as a “charge” when working out your profits for Corporation Tax payments.
If your business is not incorporated (I.e.: You are a sole trader or partnership) then any money you donate will be as individuals, rather than through your business. For a partnership to donate money, all partners (in most circumstances) will need to agree on the donation.
Under the Gift Aid scheme, good causes can reclaim the tax on charitable payments, which is currently 28% at the basic rate. To do this, you will need to give your businesses basic details (Address and contact number) and authorise it, which usually means simply ticking a box on a form or website. This allows the cause to get the full benefit of your donation.
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