Helping you prosper
Following HMRC’s recent consultation on the scope of the VAT relief for business donations of goods to charities, HMRC has now confirmed that, with effect from 1 April 2026, the VAT relief will be extended through the introduction of a new exception to the deemed supply rules in Schedule 4 VAT Act 1994 and related zero rating provisions at Item 2, Group 15, Schedule 8 VAT Act 1994. This means that as well as the VAT relief applying to donations of goods to charity for onward sale, from 1 April 2026, the relief will also apply to business donations of goods to charity where the goods are either used by the charity itself in its non-business activities or for onward donation.
This extension is a welcome development, removing the need for businesses to account for VAT on eligible donated goods. It will encourage charitable giving, reduction of waste and the reuse of surplus goods in support of a more circular economy. It will also assist charities to deliver their services and provide essential items to those in need.
The relief will be limited to goods with a value of up to £100 per item (or up to £200 for essential electrical items such as mobile phones, laptops, furniture and white goods in order to reduce digital poverty). Certain goods subject to excise duty will be excluded from the scope of the relief. At this stage, it is expected that the value of donated goods will be determined on a cost-of-goods-sold basis, unless old, second hand or reduced value, in which case, a lower valuation may apply in accordance with normal VAT principles. In addition, those receiving the donated goods will need to be registered charities (including CIOs regulated by the Charity Commission), therefore profit-distributing entities such as community interest companies (CICs) and social enterprises will not be able to benefit from the extension of the VAT relief, unless they also register as charities.
HMRC will soon publish detailed practical guidance for businesses and charities on how to apply the relief and meet the associated record keeping requirements. It is expected that businesses donating goods will need to obtain some form of certification from the receiving charity to evidence eligibility for the relief, along with details of the nature and value of the goods and proof of delivery. It is not anticipated that the charities themselves will have additional record-keeping requirements.
Businesses that donate goods to registered charities and will benefit from the additional VAT relief from 1 April 2026 onwards should keep these changes in mind and ensure they remain compliant with HMRC’s awaited detailed guidance. Charities themselves may also notice an increase in the volume of donations from 1 April 2026 and requests for related certification of their charity status from the donor business.
Please contact us if you have any questions or would like to discuss the above in relation to your own situation.
