We are very pleased to be able to announce a good news VAT story. Following a concerted effort by many charities and businesses and representative bodies and organisations, including Andy Scott at the CBI, HM Treasury and HM Revenue and Customs (HMRC) introduced a VAT relief for the donation of goods to charities with effect from 1 April 2026.
Constable VAT were directly involved in discussions with HMRC and the Treasury on this important matter and a positive outcome has been achieved. Credit to HM Treasury and HMRC for taking on board the views of charities and businesses and acting on the concerns raised. This initiative will, hopefully, significantly increase corporate donations to charity, have environmental benefits and support business.
Prior to this change, a business that donated surplus goods to a charity that intended to use those goods for a non-business purpose (either its own non-business activities or if the charity intended to give the goods away at no cost) required the donor business to account to HMRC for output VAT on its donation. As no charge had been made to the benefitting charity, that VAT was funded by the donor. This was obviously a disincentive to donate and often meant that goods that had a useful shelf life or might otherwise have been redundant for the business were simply thrown away, potentially causing damage to the environment as landfill.
Moving forward, there will be financial limits as to the value of the goods to be donated, “the applicable limit” on an item-by-item basis which will be £200 where the item donated is a household appliance, furniture, flooring (including carpets and rugs), a computer, a mobile phone or a tablet and £100 in any other case. This financial limit is based on the cost to the donor of buying an identical item to that donated, taking account of the age and condition of the item. Certain items are excluded from the relief, alcohol and tobacco products, for example.
HMRC has updated paragraph 5.5 of VAT Notice 701/1 (How VAT affects charities) and this positive step is likely to be welcomed by all.
If you would like to discuss the scope of this relief please do not hesitate to contact Stewart Henry at stewart.henry@constablevat.com or your usual Constable VAT contact.