Benefiting from Corporation Tax Relief through Zakat Payments
The question, as received
Assalamu alaikum, are we allowed to claim a donation tax refund from the government for zakat donations and also for haram money that had to be disposed of ? [Question Published as Received]
The answer
[Q1] It is permissible for a corporate company to claim additional tax relief on any donations made to a charity via their company account(s). The amount refunded or deducted from the tax bill of the donating company would be classed as a gift (hibah) from the Government, who are forfeiting their right of taxation due to the taxable amount being donated to a charity.
Explanation
When a company makes a qualifying donation to a charity or CASC, the amount paid can be set against profits for Corporation Tax purposes. The company can make a claim in its Corporation Tax Self-Assessment return to set the amount of the donation against its taxable profits, to the extent that it reduces the chargeable profit to nil.
[Q2] Donating ḥarām and unlawful money to charity is solely to absolve oneself from owning impermissible funds. The tax relief is credited by the government, who are independently forfeiting their right of taxation. Hence, the receivable amount in this case will be permissible.
And Allah knows best.
Maulana Ammar Y Badat
Reviewed and approved by Mufti Faraz Adam
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.