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Sports relief coming up
Just a quicky... where would one account for payments to charity (i'm no philanthropist but...).
I can't find a payment category that really fits the bill.
Thanks for any feedback
I can't find a payment category that really fits the bill.
Thanks for any feedback
I’m generous(ish)... but I want the Corp tax back!
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The best answer from the company
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We'll go ahead and add a category for 'Charitable Donations' (note to self: must implement customizable category lists soon!).
Or handling of this will be a bit like Depreciation. From an accounting point of view this is an expense in the Profit and Loss, but is 'added back in' for Corporation Tax purposes and then deducted under 'Capital Allowances' rules.
Now, since we model depreciation using the same rules as for Capital Allowances, we do neither of these things and still come up with the 'right' answer for the Corporation Tax calc. This won't work for much longer - the Annual Investment Allowance coming in in April will see to that.
That said, we'll take the same tack with Charitable Donations - effectively these are treated (at 80% quality Stuart!) as expenses and the end result is the same.
If we were preparing final accounts and proper CT returns, we would need to break these items out as identified by Stuart. Hence the reason we're providing a category for them just now...;->
I’m a little teapot, short and stout
The company and 1 other person say
this answers the question
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Inappropriate?A limited company gives the full amount under Gift Aid and individual gives the net amount after 22% tax relief. For example if you want to give £100 to a charity an individual will give £78 whereas a company will give £100.
The limited company has to add back the donation and then treat it as a charge. In effect it is added to the profits and then deducted so tax relief is given. (I don't know why this is so bl**** complicated!).
The individual will have already had the basic rate relief (22%) but must put it on his own tax return as well. If he pays tax at 40% the additional tax relief will be given in the annual tax calculation.
I’m wondering why tax law is so complicated
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Inappropriate?*falls over*
Thanks for the explanation, Stuart. It does seem a little nonsensical, perhaps charitable donations should be handled personally so that Gift Aid without having to add the donation as a receipt.
My company, Evolved Software Studios, has a robot monkey for a logo, so I was thinking of adopting a monkey. Might make a personal donation and simply credit it to the company, although this doesn't reduce my CT. As you say, so complicated.
I’m happy
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Inappropriate?"The limited company has to add back the donation and then treat it as a charge". Not sure I understand this sentence.
As far as my understanding goes, the charitable donation is just deducted from the Company profits and therefore there's no CT to pay on it.
Gift aid, filling out forms, logging it on my personal tax return and all the palaver that goes with that I just can't be doing with. I just pay charities with a Company cheque and was hoping for a 'category' on FreeAgent to explain it with.
I’m wishing i'd never started this
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Inappropriate?Having read my answer again I thought I should reply in English rather than Accountancy!
HMRC will not allow the gift as an expense but they will allow you to deduct it as a charge (see next sentence). This means you should show it as an expense but FreeAgent must "add it back" (add it the taxable profit) in the corporation tax computation. It is then deducted as a "charge" ( = a tax deduction).
The net result is the company gets tax relief on the donation!
Please don't shoot the messenger!
I’m not impressed by stupid tax rules
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Inappropriate?Thanks for the further explanation. I've holstered my weapon.
To be honest it does seem a rather complicated excercise in number juggling but if tax was easy then you accountancy boys would have nothing to do!?
I'm just pleased that when the dust has settled then the donations are not included in the corp tax calculation.
I still don't know what 'category' to put these charity donations in though...
I’m Mother Teresa in disguise
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Inappropriate?1. You're right most accountants would have nothing to do. Not me,however, I would do the interesting and valued stuff - the difference between 100% quality and 80% quality!
2. Yes, nobody has answered your question. I think it's down to FreeAgent now.
I’m confident
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Inappropriate?We'll go ahead and add a category for 'Charitable Donations' (note to self: must implement customizable category lists soon!).
Or handling of this will be a bit like Depreciation. From an accounting point of view this is an expense in the Profit and Loss, but is 'added back in' for Corporation Tax purposes and then deducted under 'Capital Allowances' rules.
Now, since we model depreciation using the same rules as for Capital Allowances, we do neither of these things and still come up with the 'right' answer for the Corporation Tax calc. This won't work for much longer - the Annual Investment Allowance coming in in April will see to that.
That said, we'll take the same tack with Charitable Donations - effectively these are treated (at 80% quality Stuart!) as expenses and the end result is the same.
If we were preparing final accounts and proper CT returns, we would need to break these items out as identified by Stuart. Hence the reason we're providing a category for them just now...;->
I’m a little teapot, short and stout
The company and 1 other person say
this answers the question
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