I’ve done this before and the rules here look very good. It’s possible (at least in the UK) to receive the money and then donate it to a charity and offset it against tax, but it’a s lot simpler if you never receive the money. The complicating factor is that donations to a charity (for the company to be able to treat them as donations) must be donations and not payment for goods or services. This is why you want several of those conditions: the work is not contingent on the donation. These exact rules vary from country to country, one big benefit of this approach is that understanding the rules becomes the responsibility of accountants working for the company making the donation, not of me.
(If anyone’s interested, I ask donations for work I do on open source projects that benefits companies to go to Murray Edwards College to support women studying computer science in Cambridge).
one big benefit of this approach is that understanding the rules becomes the responsibility of accountants working for the company making the donation, not of me.
I assume you’ve checked this out with a trusted accountant and/or lawyer (or three). For example, I’m not convinced the tax authorities in my own tax jurisdiction (Austria) would see it that way. Charitable donations aren’t generally tax deductible here (some select charities receive income tax collected on donated earnings) and payment in non-monetary compensation (credit on donations…) is typically taxable. And the company’s accountants are at most responsible for their employers’ side of the bargain. (More likely it’s the directors of the company who actually bear that responsibility; they certainly don’t have any particular responsibility toward the tax affairs of contractors with odd compensation schemes.)
I’d certainly urge anyone considering such a setup to independently check/get advice on if and how to ensure you can’t end up liable for income tax/VAT/social security contributions/etc. on money you never received.
And the company’s accountants are at most responsible for their employers’ side of the bargain.
I believe that bargain is the key bit here. All of the work that I’ve done like this has been contributed to open source projects with no legal agreement between me and the companies in question. They want a thing in a project, so do other people. If I add it, they are under no obligation. If they donate to a charity that I like then I may be favourably disposed to them in the future but if that constituted taxable income then any solicited donation or celebrity endorsement of a charity would count as taxable income. They may be able to deduct the donation against tax, but that’s up to their accountants.
I’ve done this before and the rules here look very good. It’s possible (at least in the UK) to receive the money and then donate it to a charity and offset it against tax, but it’a s lot simpler if you never receive the money. The complicating factor is that donations to a charity (for the company to be able to treat them as donations) must be donations and not payment for goods or services. This is why you want several of those conditions: the work is not contingent on the donation. These exact rules vary from country to country, one big benefit of this approach is that understanding the rules becomes the responsibility of accountants working for the company making the donation, not of me.
(If anyone’s interested, I ask donations for work I do on open source projects that benefits companies to go to Murray Edwards College to support women studying computer science in Cambridge).
I assume you’ve checked this out with a trusted accountant and/or lawyer (or three). For example, I’m not convinced the tax authorities in my own tax jurisdiction (Austria) would see it that way. Charitable donations aren’t generally tax deductible here (some select charities receive income tax collected on donated earnings) and payment in non-monetary compensation (credit on donations…) is typically taxable. And the company’s accountants are at most responsible for their employers’ side of the bargain. (More likely it’s the directors of the company who actually bear that responsibility; they certainly don’t have any particular responsibility toward the tax affairs of contractors with odd compensation schemes.)
I’d certainly urge anyone considering such a setup to independently check/get advice on if and how to ensure you can’t end up liable for income tax/VAT/social security contributions/etc. on money you never received.
I believe that bargain is the key bit here. All of the work that I’ve done like this has been contributed to open source projects with no legal agreement between me and the companies in question. They want a thing in a project, so do other people. If I add it, they are under no obligation. If they donate to a charity that I like then I may be favourably disposed to them in the future but if that constituted taxable income then any solicited donation or celebrity endorsement of a charity would count as taxable income. They may be able to deduct the donation against tax, but that’s up to their accountants.
Yes, FOSS contributions in that form undoubtedly are less risky from a tax perspective than other consulting services.