From 1 April 2026, businesses donating goods to registered charities for onward distribution to people in need; to another charity or organisation; or for use in the charity’s non-business activities will no longer be required to account for VAT on those items.
Such donations were previously subject to VAT at 20%, as deemed supplies, differing from the VAT relief for business donations of goods to a charity for sale.
The idea behind this change is to make it easier and more cost-effective for businesses to donate surplus goods to charities like foodbanks or shelters, allowing surplus items to be put to good use rather than being scrapped, or going to landfill.
While this change provides benefits to donor businesses, there are still a number of complexities that businesses must keep in mind when making donations:
- HMRC updated VAT Notice 701/1, where section 5.5 outlines that goods can be donated without incurring a VAT charge when goods are eligible; goods are donated for an eligible use; goods are donated to a charity registered with the Charity Commission/corresponding regulator (where required) or with HMRC for charity tax purposes; or the donor has evidence that eligible goods have been donated to an eligible charity.
- In addition, there are per item value limits under the new rules. The cap is £200 per item for a limited range of specified items: household appliances (including cookers and fridges); furniture (including mattresses); flooring (including carpets and rugs); computers, tablets and mobile phones: and £100 in any other case. Some goods subject to excise duty (such as alcohol, tobacco and vaping products) are excluded from the scope of the relief.
- The new relief does not apply to donations to community interest companies (CICs), social enterprises, or small charities not required to be registered with HMRC.
- Donor businesses need an appropriate audit trail. This will include written evidence from the recipient setting out its status as an eligible charity; and a signed statement from one of its officials confirming how the donation will be used. Donor businesses will also need to carry out checks and maintain records to help guard against breach of the rules. Such records are likely to include a description of goods donated and their quantity; original purchase price or value at donation; date of donation; and proof that they were dispatched to, or collected by the eligible charity.
Please get in touch with our experienced VAT team if you’d like to find out more about donating goods to charity.
