My company made a donation to a foreign charity, but Revenue wants to treat it as salary

MélanieO

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Two years ago a company I own made a donation to a charity that is not on Revenue's approved charity list. When we sent in the company tax return we declared the donation and paid corporation tax on it. The tax man is back and says I should have paid income tax on the donation as it was my decision to make it. My accountant is contesting view this but the whole saga is drawn out and I'm driven to distraction. Does anyone here have a similar experience or advice share. Thanks. Melanie.
 
Hi Melanie

How much was the donation?

Were you connected with the charity. What are the objects of the charity?

I am not a tax expert, so there might be specific rules.

I am trying to figure this out. Let's say I set up a charity The Burgess Fund to promote sensible politics in Ireland. That is not an approved purpose so would not get onto the Revenue's charity list.

I pay myself €10,000 gross and personally donate the €5,000 net. The Burgess Fund gets €5,000

If my company pays €9,000 to the charity. It will be added back for tax-purposes and so the company will pay around €1,000 Corporation Tax.

So the company has the same cost €10,000 but my charity gets €9,000.

I am with Revenue on this. I would treat the €10,000 as gross salary but then add it back in calculating the Corporation Tax.

Brendan
 
By the same token, if I want to give €5,000 to the National Gallery, I should do it via my company. It will be allowed as a deduction for Corporation Tax.

If I pay it to myself and pass on the net, they will get only €2,500.

Brendan
 
Hi Brendan. Thank you for your reply.

The donation was €20K, it was to an established well know foreign charity that I am not connected to in any way shape of form.

The company paid the corporation tax on the donation at the time. I am now close to retiring and cannot afford to pay the taxes being suggested at present. I do hope the accountant will get this sorted but it does not stop me worrying all the same.

Melanie
 
I won't argue tax-law here (I woud need a refresher!) but I can see why the Revenue are arguing their case.

Isn't it against company law (or against it's own Memp/Arts/Co. constitution) for any company to make decisions against its own interests?

In this case, a payment was made to a foreign charity where the company could not benefit and so, the only benefit or rationale the company would have for such a payment is to keep the Director happy i.e. treat as wages or bonus salary.

(Not arguing merits or demerits of Revenue's argument, merely trying to understand their rationale.)
 
Not sure of that argument.

Irish companies regularly donate to charity and get tax relief for doing so.

Brendan
 
It’s a long-time since I did a corporation tax return, but my sense is that Revenue are talking rubbish here. The procedure was always to check the recipients; if they had a CHY Number, you’d give a tax deduction, and if they didn’t, you wouldn’t. There was never any question of deeming a bona fide donation to be BIK. I’d stick to your guns, which to be fair is what your accountant is suggesting.
 
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Hi Gordon

Do you not think that Revenue is right here?

The tax exemption is for donations to Irish registered charities.

If people want to donate to foreign charities, they should not be getting tax relief on it.

Brendan
 
Hi Gordon

Do you not think that Revenue is right here?

The tax exemption is for donations to Irish registered charities.

If people want to donate to foreign charities, they should not be getting tax relief on it.

Brendan

Hi Brendan,

No I don’t think they’re right. The correct position should be to deny the tax relief (i.e. the corporation tax deduction) where the donation is to a body that doesn’t have a CHY Number. This BIK stuff is mad unless it’s a case of Burgess Enterprises Limited making a charitable ‘donation’ to the Bianco Burgesso Chianti Relief Fund.

Gordon
 
Not sure of that argument. Irish companies regularly donate to charity and get tax relief for doing so.
But don't they advertise the fact so there is a benefit?

The correct position should be to deny the tax relief (i.e. the corporation tax deduction) where the donation is to a body that doesn’t have a CHY Number. This BIK stuff is mad unless it’s a case of Burgess Enterprises Limited making a charitable ‘donation’ to the Bianco Burgesso Chianti Relief Fund.

The Revenue tend to have detailed operating manual notes for most situations, very little is left to caseworker discretion IMHO. The notes for implementation were always redacted for confidentiality purposes when they published their guidance on various areas. (been a while since I read Irish Revenue guidance admittedly)
 
I would like to update and thank contributors who replied to me in April on this matter.

Gordon Gekko above is quite correct and I did take comfort from his comments at that time.

The tax office have conceded that the donation to the UK charity was a company expense and I should not pay tax on this personally. A great relief to say the least.

Thanks again to everyone and to the forum.

Melanie
 
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