VAT boost to charitable donations

The government is looking to introduce a new relief that would provide a VAT boost to charitable donations. The new VAT relief would be designed to encourage businesses to donate everyday items to charities without creating a VAT liability. A 12-week consultation on the proposed changes will be launched before 23 July 2024.

Under the current rules, firms do not pay VAT on any goods they donate which are then sold on, such as clothes, hygiene supplies and cleaning products. However, if these goods are not sold but are instead distributed free of charge to those in need VAT must be accounted for. 

The proposed relief would help encourage donations of low value household goods such as:

• hygiene items (soap, toothpaste, toothbrushes, shower gel, toilet rolls)
• second hand items from hotels (such as sheets, kettles)
• cleaning supplies – including laundry detergent

The new VAT relief will not include goods which are donated to charities for the charity to use, such as new IT equipment, in order to prevent any possible VAT avoidance.

The result of the consultation and confirmation of any changes will be announced at a future fiscal event.