Glossary · UK
What is Qualifying Charitable Donation (Corporation Tax)?
A donation a limited company makes to charity that can be deducted from its taxable profits before Corporation Tax is calculated, reducing the company's tax bill rather than the individual's.
Full Definition
A qualifying charitable donation is a gift a limited company makes to a UK charity (or, subject to conditions, certain overseas charities) that the company can deduct from its total taxable profits before calculating its Corporation Tax bill, giving corporate donations broadly the equivalent tax benefit to Gift Aid for individuals, but structured as a straightforward deduction from profits rather than a top-up claimed by the charity. To qualify, the payment must genuinely be a gift with no more than incidental benefit returned to the company (for example a modest acknowledgement is fine, but a substantial sponsorship benefit in return may need to be treated as a business expense instead, or split between the two), and the company must keep records showing the payment was made and to which charity. Because the donation reduces taxable profit rather than being a tax credit, the actual cash saving to the company is the donation amount multiplied by its effective Corporation Tax rate -- so a company paying the 25% main rate saves 25p of tax for every pound donated, while a company benefiting from Marginal Relief saves at its own effective marginal rate. Qualifying charitable donations can be carried back to the immediately preceding accounting period in limited circumstances, and unlike an individual's Gift Aid donation, there is no requirement for the charity to separately reclaim tax from HMRC, since the company simply deducts the payment in its own Corporation Tax computation.