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Charitable donations in respect of subcontractor work completed

I work in a manufacturing company where we have several staff who work inspecting the goods built ensuring they are good for sale.

We currently have a gentleman working as a subcontractor in our inspection department as they are short-handed. He has provided us an invoice for his past weeks work but the money is actually being paid to a registered charity he runs rather than to himself. 

My first thought is that this is subcontract work and shall be entered onto the ledger as indirect labour but as the money itself is being paid to a registered charity surely this is classed as a charitable donation? Both are obviously disallowable for tax purposes but are treated differently.

My thoughts are either is fine but am I missing anything else or just being very thick!

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You are paying for sub-contract work

Having done something similar in the past, as long as your arrangement (contract) is with him then you are paying for sub-contract labour and the fact he wishes you to make the cheques out to a charity, is, I believe, his concern.

By the way companies do get tax relief on charitable donations.

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19th Mar 2012 14:06

Can of worms...

I assume the sums are not material but in theory this could be complex:

Did the company contract with the charity?

If so it's an indirect labour cost in the company and trading income (possibly taxable) in the chariity's books.

If the company contracted with the man, and he has invoiced but wants the cheque paid to the charity, then it is a subcontract cost in the company's books, self employment income in the man's, and then a donation from the man to the charity. The charity has no right to the income, except by his goodwill.

So either way it's an expense (not a donation) in the company's books.

That's what I think, anyway.

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