Charitable donations: where to enter them and how the Corporation Tax relief works

Short version. Enter a charitable donation in both places. Leave the payment inside your expense figures, because it is a real cost that your accounts must include. Then enter the same total in the Charitable donations field in the Tax adjustments section, directly below Disallowable expenses. We add the payment back to your trading profit and claim the relief where HMRC expects it, as a qualifying charitable donation in box 305 of your CT600. The relief can reduce your taxable profits to nil but no further, and any unused amount is lost rather than carried forward.

What counts as a qualifying charitable donation?

Our Charitable donations field supports money your company paid to a charity on one of the UK charity registers, which are the Charity Commission for England and Wales, OSCR in Scotland and the Charity Commission for Northern Ireland. It also supports payments to a registered community amateur sports club (CASC). Neither the company nor anyone connected to it can have received anything in return when you use this field. That includes one-off gifts and regular monthly giving added up for the year. HMRC explains the wider rules in tax when your limited company gives to charity.

The wider tax rules can also cover a charity that HMRC recognises for tax purposes even when it is exempt or excepted from a public register. They can also permit a small benefit within HMRC's value limits. Our confirmation covers the simpler registered, no-benefit case only. Contact support before claiming if either exception applies.

Do not include:

• Sponsorship or a payment involving a benefit. Advertising, use of the charity's logo or another business-related benefit can make the payment sponsorship, which may qualify as a normal business expense instead. Tickets and other benefits can fall within separate statutory value limits. Our field does not decide between those cases, so contact support before claiming if the company or anyone connected to it received anything.
• Gifts of goods, equipment, shares or land. These are relieved in a different way and we cannot claim them for you yet. Contact support.
• Payments to recipients outside our registered-charity and CASC scope. Some exempt or excepted charities can still be recognised by HMRC for tax purposes, so contact support rather than assuming the payment gets no relief. If the recipient has no qualifying charity or CASC status, the payment belongs in the Disallowable expenses field.
• Personal Gift Aid declarations. Company donations are sometimes called corporate Gift Aid, but the company does not use an individual Gift Aid declaration. It pays the donation gross and claims relief through its Corporation Tax return instead, which is exactly what this article covers.

When you enter a donation we ask you to confirm it was a cash gift to a UK registered charity or CASC, and that neither the company nor anyone connected to it received anything in return. We cannot check charity status or benefits for you, and each condition decides whether the deduction is due, so the confirmation is required before we will claim it.

Where to enter it: the same two-place rule as disallowable expenses

Suppose your company gave £1,000 to a registered charity during the year. In the wizard:

1. Leave the £1,000 in your expense figures (normally administrative expenses). Your annual accounts must include your true costs, and under FRS 105 a donation is an ordinary expense with no separate line.
2. Also enter £1,000 in the Charitable donations field in the Tax adjustments section, directly below Disallowable expenses, then tick the confirmation.

Enter the total paid in the accounting period. The relief is given for the period in which the donation was paid, not pledged, so a promise to donate next year does not count yet.

What it does on your return: box 305

A charitable donation is not a trading expense for Corporation Tax. The law (section 1300 of the Corporation Tax Act 2009) blocks it as a trading deduction and instead gives relief as a deduction from your total profits (section 189 of the Corporation Tax Act 2010). On the CT600 that looks like this:

• Box 300 shows your profits before donations.
• Box 305 shows the qualifying charitable donation being deducted.
• Box 315 shows your profits chargeable to Corporation Tax after the deduction.

A worked example. Your company has £21,000 of trading profit after the £1,000 donation sat in its expenses. We add the £1,000 back, so box 300 shows £22,000, box 305 shows the £1,000 donation, and box 315 shows £21,000 chargeable to tax. If the company qualifies for the 19% small profits rate, the donation saves £190 of Corporation Tax. The tax computation we file alongside the return shows both steps transparently, the add-back and the deduction, so HMRC can see exactly what happened.

Donations larger than your profits: the cap

The relief can reduce your taxable profits to nil but never below nil. If your company donated £5,000 in a year when its profits before donations were £3,000, only £3,000 of relief is used and box 315 shows nil. The unused £2,000 is simply lost. It does not create a loss, it does not carry forward to next year and it cannot be carried back. We show you the used and unused amounts on your results screen so a wasted amount is never silent.

If your company made a loss before donations, the donation gets no relief that year at all, and your loss is unchanged. That is deliberate in the law: a wasted donation must not quietly become a carried-forward loss, because losses never expire and the relief does.

A donation can lower your tax rate, not just your profits

Which Corporation Tax rate you pay depends on your augmented profits, and those are measured after the donation is deducted. A donation can therefore move your company from the main rate into marginal relief, or from marginal relief into the 19% small profits band. For example, assume an eligible company has a 12-month accounting period, no associated companies and no relevant exempt distributions. If it has £51,000 of profits and donates £1,500, it has £49,500 of chargeable profits and pays the small profits rate on all of them. We calculate this automatically, so the band is always worked out from the post-donation figure the law specifies.

Why we add the donation back first

You might see other software, or general guidance, suggest simply entering a donation as a deduction in box 305 with no other adjustment. If the donation is already sitting in your expense figures, that claims the relief twice: once inside your trading profit and again in box 305. In a profitable year that understates your tax, and in a loss year it manufactures a carried-forward loss out of relief the law says is wasted. HMRC can charge interest and penalties when an error like that is corrected later.

That is why we use the two-place rule. Your accounts keep the true cost, the computation adds the payment back to trading profit, and the relief is then claimed once, in the right box, capped at your profits. You get every pound of relief you are entitled to and not a pound more, and your accounts never have to be distorted to make the tax work.

What we cannot claim for you yet

• Companies with property income only. The relief genuinely applies to a property-only company, but our current calculation cannot represent it, so we ask whether you donated and pause the filing rather than file without the relief. Contact support and we will help.
• A first accounting period longer than 12 months. A long first period files two Corporation Tax returns, and the relief belongs to the return covering the date each donation was paid. We do not yet assign donations between the two returns, so we stop rather than guess. Contact support.
• Gifts of goods, shares or land, and donations with benefits in return, as above.

In each case the pause is deliberate. Filing without the relief would mean overpaying tax, and filing with a wrongly calculated claim is worse, so we tell you honestly instead.

Already filed without claiming a donation?

If you filed a return and the donation was never claimed, the return can be corrected within HMRC’s amendment window. File an amendment and include the donation this time.

This article is general guidance, not tax advice. Whether a payment is a donation or sponsorship, and whether a recipient is a registered charity, can involve judgement. If you are unsure, check GOV.UK or speak to an accountant.