The Indirect Benefits of Corporate Charitable Donations

Success goes beyond profit margins and market shares in today’s dynamic business environment. Private companies are increasingly recognising the importance of Corporate Social Responsibility (CSR) – an approach to business that integrates philanthropy, ethics and activism into your practices.

Supporting local charities making a difference in their communities is perhaps the most straightforward and accessible way for companies to achieve this. But did you know that there are a whole bunch of financial and social benefits that come with these corporate donations?

Let’s delve into some indirect benefits of corporate social responsibility (CSR) and find out how it makes business sense to give back to the community.

Corporation Tax Relief:

When your business makes donations to UK charities registered with HMRC, you’re eligible to pay less corporation tax at the end of the financial year. This means the amount your company donates can be deducted from your profits before calculating your tax.

These donations can range from:
Donating money to help fund a charity;
Giving equipment or stock to help with their operations;
Donating land, property, or shares in another company;
Lending employees on secondment;
And sponsorship payments to regularly support the work they do.

Many businesses already incorporate charitable donations into their yearly financial plans as it’s an easy victory for both profits and public perception.

Effective Local Advertising of your services and brand:

When donating to a local charity you’re not only helping keep them afloat and achieve their goals but also raising awareness of your own business in a public and respectable way at the same time. Consider using the donation as an opportunity to promote your brand to a wider audience. This is especially effective if the charity has a strong online presence or receives a lot of media coverage.

You can also display the charity’s logo or name on your website, social media pages and marketing materials to show customers and potential clients that you care about the community and are willing to support a good cause. Not only that but by enhancing your reputation and credibility, you’ll attract valuable new customers and employees who share your values.

Employee Wellbeing and Respect:

Charitable donations can also have a positive impact on your employees’ well-being and respect. By involving them in choosing the charities you support, or organising fundraising events or volunteering opportunities for them, you can boost morale, motivation, and camaraderie amongst your staff as they work together for a common goal.

Additionally, you can demonstrate your appreciation and recognition of their efforts, by matching their donations or rewarding their participation. This can increase their loyalty, retention, and productivity, as well as attract new talent who want to work for a socially responsible company.

Payroll Giving and Gift Aid:

It’s also good to note that businesses are not the only ones who can financially benefit from charitable donations, employees can also harness donations for their own tax breaks through Gift Aid and Payroll Giving.

Payroll Giving allows employees who pay income tax in the UK to give on a regular, tax-free basis to the charities of their choice. This money gets taken directly from an employee’s pay before income tax is deducted, meaning that the charities receive the full amount whilst the employee pays less income tax even at the highest rates.

On the other hand, Gift Aid is a much simpler scheme that allows charities to claim back the basic rate of income tax that donors have paid on their donations. The donations are made from net pay after income tax is deducted, and donors have to declare that they’re eligible as part of the process.

On top of this, donors who pay higher or additional rate tax can also claim extra tax relief of up to 25% on top of gift-aided charity donations. This means that for every £100 donated, you could claim back up to £31.20 in relief.

The Benefits of Corporate Charitable Donations

In summary, when your business contributes to charities registered in the UK, you’ll become eligible for reduced corporation tax by deducting the donations from your overall profit before calculating tax at the end of the financial year. Donations take various forms, such as money, equipment, or temporary employees and can lead to greater profit overall by lowering your tax band and your outgoing payments.

Supporting local charities not only helps them achieve their goals but also serves as an extremely positive way to advertise your company’s brand. By promoting your business through charity sponsorships, displaying the charity’s logo on your website and social media, and participating in community initiatives, you enhance your reputation and attract customers and employees who share your values. Additionally, involving employees in charity choices and the organisation of fundraiser events can foster well-being, motivation, and a sense of camaraderie within your staff.