Gift Aid Donation
Instead of paying for a marketing cost, your business could donate to charity. If the expense qualifies as a donation under Gift Aid, the donation will be disallowed in the LLP Tax Return, however relief is available in each respective member’s personal Tax Return.
You can obtain relief by extending the amount on which each member is taxed at the basic rate (20%) by the gross amount of each member’s donation. For example, a gross donation of £1,000, including the basic rate tax the charity will claim, will extend the individual’s basic rate band of £37,700 currently in the 2020/21 tax year to £38,700. If the individual is a higher rate taxpayer, this will result in tax relief being obtained of £200, and if the individual is an additional rate taxpayer, relief of £250.
Gift Aid donations will be particularly appealing to those members who have taxable profits between £100,000 and £125,140 in the 2021/22 tax year, where the member’s personal allowance will begin to be restricted. This is due to donations allowing the member to obtain tax relief at 60%, due to the clawback of their personal allowance as well as the higher rate tax relief.