Sarah Shears comments on VAT relief on donations to charities, in Financial Accountant

Partner and Head of VAT, Sarah Shears, discusses the UK’s new VAT relief for business donations of goods to charities, in Financial Accountant.

Sarah’s comments were published in Financial Accountant, 15 July 2026, and can be found here.

How significant is this change in practice for charities and donors?

“This new relief removes a pre-existing anomaly in UK VAT law which meant that it could be more cost effective for businesses to scrap certain items which were no longer needed rather than donate them for use by a charity. The current relief, which only covers the donation of goods for resale by a charity, is now extended and aligned to include goods for onward distribution or for internal (non business) use by a charity without incurring a VAT charge.”

Will it meaningfully encourage more in-kind giving?

“The changes should have the effect of reducing the VAT cost associated with donations of certain items to charities. The responses received by HMRC to their April 2025 consultation on the relief indicated strong and widespread support with businesses – the ability to donate goods to a charity without incurring a VAT charge would increase the volume and range of donations businesses could make. HMRC will be monitoring the position closely moving forward to ensure the new reliefs have their intended effect.”

What are the key VAT technical issues or grey areas?

“From the perspective of the donating business, the key VAT considerations include ensuring that the organisation receiving the donation is eligible and also that the goods being donated fall within the scope of the extended relief. The other technical consideration relates to the valuation of these goods, where they are non-stock items, and businesses will need to consider existing VAT principles when confirming that the per items value limits are being met.”

Are there any risks, limitations, or unintended consequences?

“There are financial limits on the value of items that can be donated under this relief – £200 for specified essential goods, which include white goods, furniture, computers and mobile phones, and £100 for other items. Additionally, it should be noted that donations are limited to charities that are either registered with the Charity Commission, corresponding regulator (where required) or registered with HMRC for charity tax purposes. Donations to small unregistered charities or other community interest groups are therefore not covered.”

What should accountants be doing now to advise clients effectively?

“Accountants should be working with their clients to ensure they understand the scope of the new rules and have sufficient processes and controls in place, including requesting charities to provide certificates confirming their eligibility, to ensure they can provide evidence to HMRC that they are applying the reliefs correctly.

“HMRC have indicated that they will provide detailed guidance on compliance and the associated requirements. Accountants should ensure they are familiar with this guidance and consider how it should be applied to their clients.”

---