Hi there,
I have a day-to-day salaried job, but have in recent months also been operating as a sole trader. The business I do as a sole trader is entirely charitable – all profits from sales of the goods I produce go directly to charities. I'm a standard rate taxpayer, so can't claim relief under Gift Aid through higher rate tax contributions. What I was wondering was whether, as the whole function of my business is to give to charity, whether the charitable donations I make are deductible as business expenses. The ideal would be, of course, for profits (post-donations) to equal zero, and so to ensure that I pay no tax and can give all the money to charity. As this is a one-time venture and I'll cease operating as a sole trader within the next couple of months, there's no point in me registering as a charity or similar.
Any guidance would be much appreciated!
Replies (3)
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No they are not deductible as business expenses. Just make the donation of your post tax profits and report it on the GA part of the SA return. The whole point of GA is that the charity can recover the tax you have paid. This gets you to the same point (all your profits go to charity), but with the tax part going via HMRC
The alternative would be to incorporate as donations are deductible for a limited company. Charities do not get gift aid on donations from companies though so, as WhichTyler has pointed out, they end up with the same donation either way and the limited company route would result in more administration and probably fees for you therefore less profits for the charity.
Both of the previous responses ignore the NIC position. Are you going to incur NI on the 'profits'? This will depend on how much they are (and possibly how much NIC you pay in your employment although as a BR taxpayer I don't think we need to worry too much about that.
Also, I read it to be that the 'sole trade' has already begun or completed - so0 incorporation wouldn't solve the problem going back.