From 1 April 2026, a new VAT relief applies to businesses donating goods to charities, removing a long‑standing VAT charge that often discouraged charitable giving.
Previously, while goods donated for resale (such as through charity shops) were VAT‑relieved, businesses could still face a VAT charge when donating goods for free distribution or use in a charity’s services. This sometimes made it cheaper to dispose of surplus stock, rather than donate it.
What’s changed?
Businesses are no longer required to account for VAT when donating eligible goods to registered charities, provided the goods are:
- Donated for free onward distribution, or
- Used by the charity in delivering its non‑business services.
This creates a new exception to the VAT “deemed supply” rules and aligns the treatment of different charitable donations.
Which goods qualify?
The relief is subject to item value limits:
- £100 per item for most goods
- £200 per item for certain essential goods, including furniture, household appliances, flooring and computers
Goods subject to excise duty, such as alcohol, remain excluded.
Who does this affect?
The change directly impacts businesses – particularly manufacturers, wholesalers and retailers – that donate surplus or unused stock. Although charities benefit indirectly through increased donations, there is no change to their own VAT accounting obligations.
It is important to note that only donations to registered charities qualify.
What should businesses do now?
With the relief now live, businesses should consider:
- Reviewing how VAT is applied to current or planned goods donations
- Ensuring donated items fall within the permitted value limits
- Putting appropriate valuation and record‑keeping processes in place
- Talking to charity partners about donation opportunities that may previously have been VAT‑prohibitive
Applying the relief correctly is essential to avoid errors or challenges from HMRC.
How PM+M can help
Our VAT specialists can help you understand how the new relief applies to your business and ensure donations are accounted for correctly. If you’d like to discuss what this means for your business, please get in touch with Lorna Hammond by clicking the button below.
