In April 2025, HM Treasury announced a consultation seeking views on the introduction and design of a VAT relief on goods donated to charities to give away free of charge or use in the delivery of their services. The government recognised that the current VAT rules (which relieve VAT on goods donated to charity for sale), but not for onward donation or the delivery of the charity’s services, are not aligned.
CFG’s response, on behalf of our members, outlines our belief that this relief would ensure that donating goods is more straightforward by eliminating:
- the need to demonstrate the calculations around the value of goods donated.
- the need to carry out VAT calculations on the value of the goods donated.
- the perceived risk to businesses of ‘getting it wrong’.
CFG believes that this would be beneficial through encouraging an increase in donations of goods to charity, which they could then either use or pass on to those in need. We also agree that implementing the proposed relief will encourage businesses to donate goods to charity that otherwise would be destined for landfill.
In addition to supporting the relief, we do not believe there should be a value limit set on individual items donated. In our response, we highlight that computing equipment or mobile phones ‘can be a lifeline for people whose lives have been disrupted’. We also argue that, should a value limit be introduced, this should be reviewed at least every three years and adjusted in line with inflation to ensure the original intention of the relief is protected.
CFG’s Deputy CEO, Clare Mills comments:
“VAT is a hugely complex area and the issue of VAT on goods donated to charities by businesses is a great example.
"As it stands, a business does not have to account for VAT on surplus or unwanted goods they donate to charity, if the goods are to be sold to raise money. So, a donation of 100 saucepans from a cookware manufacturer to be sold in a charity shop is straightforward.
"But should the receiving charity want to gift those saucepans to people in need, or use the saucepans in the operation of the charity by cooking food for people in need, then the business would need to calculate and account for VAT.
"This complexity can act as a barrier to the donation of goods and means items like these fictional saucepans go to landfill.
"Simplifying the VAT rules to make it easier for businesses to donate goods to charities that can then sell, use or pass them on - all in support of their beneficiaries - makes sense. We hope HM Treasury will work with us and other consultees to find a workable solution, for businesses, charities and most importantly, the people and communities that charities serve."
Download and read our full response
« Back to all news