A RELAXATION in the rules for tax relief on telephone donations made by individuals is due to come into effect on November 1 in response to the growing number of international appeals for help - highlighted by the recent Asian earthquake and Tsunami on Boxing Day.

In the meantime, sole traders and partnerships can use the existing Gift Aid scheme under which charities can claim back 28p in tax for every pound donated.

Leading accountancy firm Tenon is advising Dorset businesses, however, that the system works in a different way for companies.

They get the tax relief themselves, so a donation of £100 only costs a company in the 30 per cent band £70.

So companies can afford to be more generous - a donation of £142 will in reality only cost them £100.

But direct cash donations are not the only possibility as business can give quoted shares and securities, land and buildings to a charity, which can then sell them to raise funds.

This is usually more effective than the company selling the asset and giving the cash to charity.

Trading stock, plant and machinery can be donated tax free to a charity. So a blanket manufacturer, for example, could get tax relief on a donation of blankets to the earthquake appeal.

Seconding staff to a charity means businesses can lend their expertise to charities in times of need while claiming tax relief on the associated employment costs.

Longer term, businesses can get tax relief on charitable sponsorships so sponsoring an emergency relief hospital in Pakistan would be another mutually beneficial option.

Michelle Harris, director of tax at Tenon comments: "We have more than 3,000 clients who are predominantly owner-managers of small and medium sized businesses in the UK.

"They tell us that whenever they try to respond to emergency appeals, they're taken aback by the complexities of the tax rules.

"We welcome the Chancellor of the Exchequer's proposed changes to the Gift Aid scheme but we would like to see him being much bolder.

"Surely the time has come for charities to be able to claim tax relief on all donations, whether or not the donor has paid any tax that year.

"Had such a system already been in place the natural generosity of people in Dorset, enhanced by tax benefits, could have done even more to help alleviate suffering."

First published: October 19