Donations by a subsidiary to its charitable parent are now regarded as a “distribution” under company law and therefore can only be made from profits available for distribution (based on accounting profits). These may be different to the taxable profits which have often been donated to the parent charity. To the extent that any donation payment exceeds profits available for distribution, payment of the excess is unlawful.
In addition, an expected gift aid payment shall not be accrued unless a legal obligation, such as a deed of covenant, to make the payment exists at the reporting date. A board decision to make a gift aid payment to a parent charity, that has been taken prior to the reporting date, is not sufficient to create a legal obligation.
The gift aid payment must also be made in cash within nine months of the year end in order for it to secure tax relief for the subsidiary in the year in which it was accrued.
Get in touch
If you have any questions about gift aid payments, please contact mail@ct.me.
