Donations

This Overheads code records the cost of donations incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Genuine charitable donation

A construction firm gives £500 to a local charity with nothing given in return. Because a straightforward donation isn't consideration for a supply, no VAT applies at all — it's a debit of £500 to 8200 (Donations) and a credit of £500 to 1200 (Bank). Provided it's paid under Gift Aid to a UK-registered charity, the company can usually also deduct the donation against its corporation tax bill.

Sponsorship, which isn't really a donation

A retail or hospitality business pays a charity £2,400 (£2,000 net of VAT) to sponsor an event, getting its logo on promotional material and a stand at the venue in return. Because the charity is providing something of value back, this isn't a donation for VAT purposes at all — it's a supply of advertising services. If VAT is charged, that's a debit of £2,000 to an advertising code (such as 6201) rather than 8200, a debit of £400 to 2201, and a credit of £2,400 to 2100. Genuine sponsorship rarely belongs in the Donations code at all.

Commonly confused with

Because code 8201 (Subscriptions) sits right next to this one in Overheads & Depreciation, it's a common mis-posting target. Code 8200 is specifically for donations, while 8201 covers subscriptions — similar in nature, but keeping them separate is what makes the overheads & depreciation section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Donations won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads & Depreciation