HM Treasury has released a summary of responses to its consultation 'VAT treatment of business donations of goods to charity'. The outcome of the consultation, announced at Autumn Budget 2025, is the introduction of a new VAT relief for business donations of goods to charity for onward distribution or use in the delivery of the charity's services.
In Spring 2025, a consultation was published on the VAT treatment of business donations of goods to charity, seeking opinions on how best to design a VAT relief that would encourage charitable donations while reducing waste.
The consultation explained that the VAT rules on such donations for resale by charities were not currently aligned with those for goods donated to charities for onward endowment or delivery of a charity’s services.
Views were sought on the following:
- The objectives of the new relief.
- The types of goods that might be eligible for the relief.
- Which recipient organisations should qualify for the relief.
- Administrative arrangements such as record-keeping, certification and compliance.
The consultation received 39 responses from a mix of registered charities, social enterprises and professional bodies.
Objectives of the relief
The consultation sought views on the objectives of the relief, which included encouraging charitable donations that reduce waste and prolong the life of saleable goods that would otherwise be sent to landfill by businesses while also protecting the tax base.
- There was significant support for the VAT relief, with respondents stating that it would be highly effective in increasing charitable donations and increasing the value of goods donated to charity.
- Many respondents believed that the introduction of the relief would unlock significant additional volumes of goods for reuse, reducing landfill and carbon emissions.
- Some respondents stated that the relief would remove the VAT barrier, making donating the default option for businesses.
- There was some apprehension from respondents regarding appropriate safeguards to ensure charities were not burdened with unusable and poor-quality goods.
The government responded by stating that it will legislate to introduce a targeted VAT relief on business donations of goods to charity, where the goods are for onward donation or use by the charity in its non-business activities.
Goods eligible for the relief
Views were sought on the value of a limit placed on goods donated and what type of categories of donations should be eligible for the relief.
- The majority of respondents favoured a proposed item threshold of £100 per item.
- One organisation reported that 90% of their donations were below £100.
- Some concerns were raised that this limit may exclude higher-value goods such as laptops or white goods.
- It was also highlighted that any limit would need to be reviewed regularly and raised in line with inflation.
There was significant support for the category of goods to be broad and inclusive.
- Categories suggested included electronics, white goods and essential non-food items such as hygiene products and clothing.
- Categories such as alcohol, tobacco and luxury goods would be excluded.
There was support for the relief to apply to goods donated, which were both for onward distribution and for use in the delivery of the charity's services.
- Respondents warned that restricting the relief to goods for distribution only would create administrative burdens.
- There was also concern that it would be difficult in smaller organisations to track and separate goods by intended use.
The government has decided to implement a £100 per item value limit on most goods; however, there will be an upper limit of £200 for specified items such as white goods, mobile phones and tablets.
The relief will apply to goods donated for both onward distribution and for use in the charity's own non-business services.
Eligibility for the relief
A range of views were given on the eligibility criteria, with many agreeing that a broad approach should be used.
- Most respondents also recognised that robust regulatory oversight was important and a need to protect from fraud.
- There was significant opposition to restricting the relief to charities with a poverty relief objective.
- Further objectives to restricting the relief to certain charities could risk excluding impactful organisations and create operational challenges.
- There was overwhelming support for the relief not to be restricted to individuals in receipt of welfare benefits, nor should there be a cap on the value of VAT-free donations that an individual can receive.
The government has decided that the relief will apply to charities registered with HMRC for tax purposes and where required, registered with the main charity regulator in each part of the UK. This includes CIOs, which are regulated by the Charity Commission and subject to the same governance as other registered charities.
The government has recognised that small charities, which may not be registered, make a significant contribution at a local level. In the absence of regulatory oversight of their accounts, there is a significant fraud risk in including them for the relief; therefore, they will not be eligible. Should small unregistered charities wish to benefit from the relief, they must register with HMRC for tax purposes.
Administration of the relief
There was support for the introduction of a certification scheme that builds on the existing model used for donations.
- There were two options discussed:
- Certification on a per-delivery basis.
- Certification by the recipient organisation on an annual or periodic basis.
- Some respondents noted that the per-delivery basis could have potential issues where there were discrepancies between the goods a business thought it sent and what the charity received.
- There was greater support for certification by the recipient organisation.
- There was significant support for requiring some form of delivery note confirming that goods have been delivered.
- It was also noted that small businesses will face higher administrative burdens, so the requirements for the relief should be proportionate.
- Most respondents suggested that they already have record-keeping systems in place, but to keep administrative burden low, HMRC should allow organisations to build on what they already do.
- Respondents believed that valuing donated goods should be kept simple, with the most popular method suggested being to use the cost of the goods sold as the basis for valuation.
The government has said it will keep the administrative burden proportionate, particularly for small businesses and low-value donations.
- Record-keeping will not be prescriptive, but HMRC will provide guidance on this.
- HMRC will not be prescriptive in the format of certification which they accept as proof of entitlement to the relief.
- Donor businesses will be expected to retain evidence that goods have been delivered or made available to an eligible charity.
- There will be no additional record-keeping requirements for charities.
The new relief will come into force on 1 April 2026.
Useful guides on this topic
Business Gifts
What are business gifts? Are business gifts allowable for tax purposes? What needs to be disallowed?
Wholly and exclusively...Toolkit
When is an expense allowed for tax purposes? What does 'wholly and exclusively' mean? How do you determine if a cost is wholly and exclusively incurred for the purpose of a trade? What cases are there?
External link
Consultation outcome: VAT treatment of business donations of goods to charity