Consultation outcome

VAT Treatment of Business Donations of Goods to Charity: Summary of Responses

Updated 26 November 2025

1. Introduction

The government values the important role and contribution that charities and community organisations play in supporting those in need and strengthening communities across the UK. It is committed to ensuring that the tax system enables and encourages generosity from businesses and individuals, helping charities to deliver essential services to the people who rely on them.

For this reason, at Autumn Budget 2025 the Chancellor announced the introduction of a new VAT relief for business donations of goods to charity for onward distribution or use in the delivery of their services. This relief will make it easier for businesses to donate surplus goods, helping charities to deliver their services and provide essential items to those who need them most.

In Spring 2025, the government published a consultation on the VAT treatment of business donations of goods to charity. The consultation sought views on how best to design the relief to encourage charitable giving and reduce waste, while protecting the tax base and minimising opportunities for fraud or abuse.

The consultation invited stakeholder views on the following areas:

• The objectives of the proposed relief;
• The types of goods that might be eligible;
• Which recipient organisations (and the purposes for which they receive goods) should qualify; and
• Administrative arrangements necessary to support the relief, including record-keeping, certification and compliance.

This document summarises responses to that consultation and outlines the government’s response.

The government is grateful for the high quality and depth of engagement from stakeholders throughout the consultation period and has considered all responses very carefully.

The consultation ran for 12 weeks, closing on 12 July 2025. It was a joint exercise between His Majesty’s Revenue and Customs and His Majesty’s Treasury. The government would like to thank the 39 respondents who shared their views.

2. About the respondents

To ensure the proposed VAT relief is practical and effective, the consultation asked 6 questions about respondents and their donation practices. This enabled a clearer understanding of the organisations most likely to use the relief, and how their current operating models could be supported or enhanced. The information received has enabled the tailoring of the design of the relief to real-world needs and maximising its impact.

Q1: Are you responding as a business, charity, charitable incorporated organisation, individual, or another type of organisation?

Q2: If responding as a business, please provide details of turnover, size, sector, location, if you currently donate goods free of charge and any barriers to donating stock.

Q3: If responding as a charity, please provide details of income, size, charitable aims, location, donation practices

Q4: If responding as another type of organisation, please provide details of size, aims and functions, location, donation practices

Q5: If you are currently either donating goods or receiving donations, please provide details of your operating model.

Q6: Would you use a relief on goods donated to charity to give out free of charge or use in the delivery of their services?

2.1 Summary of responses

The government received responses from a broad cross-section of organisations. Of the 39 responses:

• Just under half were from businesses, including major retailers, technology firms, manufacturers, logistics providers, and small enterprises.
• Around a third were from registered charities or charitable incorporated organisations (CIOs), ranging from large national charities to smaller, specialist and local organisations.
• Several responses came from social enterprises, community interest companies (CICs), and hybrid organisations involved in charitable distribution or reuse.
• A number of professional bodies and trade associations also contributed, representing members across business and charity sectors.
• A small number of respondents were individuals.

Respondents provided information about their size, turnover, charitable aims, and sector. Businesses ranged from small consultancies and manufacturers to major multinational retailers and technology companies.

Charities included both large organisations with national reach and significant income, and smaller charities focused on local or specialist causes.

Social enterprises and CICs were typically involved in the redistribution of surplus goods, supporting both social and environmental goals.

Professional bodies and trade associations responded on behalf of their members, focusing on technical and operational issues relevant to the proposed relief.

Donation practices varied widely among respondents. Larger organisations tend to donate or redistribute goods at scale, often through formal partnerships or structured programmes, while smaller entities and individuals typically donated goods on a more ad hoc or informal basis.

Commonly donated items included food, clothing, furniture, technology, and hygiene products. Most respondents reported that relationships with recipient organisations ranged from one-off gifts to long-standing partnerships, with varying degrees of formality and oversight.

There was strong and widespread support for the proposed relief. Businesses consistently indicated that the ability to donate goods to charity without incurring VAT would significantly increase the volume and range of donations they could make. Charities and social enterprises also emphasised that increased donations would boost their capacity to support beneficiaries and deliver public benefit.

3. Objectives of the relief

In the consultation the government set out its objectives for any relief, including; to encourage charitable giving, to reduce waste by prolonging the life of saleable goods which businesses put into landfill, and to protect the tax base. The consultation asked the following questions to probe whether the proposed relief would meet these objectives.

Q7: Would the proposed relief encourage donations?

Q8: Would the proposed relief support circular economy objectives by encouraging the donation of goods which may otherwise be put into landfill?

3.1 Summary of responses

There was overwhelming consensus among stakeholders that the proposed relief would be highly effective in increasing both the volume and value of goods donated to charity. Respondents across the sectors described VAT as a deterrent to donation, noting that surplus goods are often destroyed or disposed of rather than donated.

Many businesses and charities anticipated that a relief would unlock significant additional volumes of goods for reuse, with some estimating a tenfold increase in donations and substantial environmental benefits, including reduced landfill and carbon emissions. Stakeholders emphasised that removing the VAT barrier would make donation the default option for many businesses, particularly small and medium-sized enterprises for whom the current rules are complex and costly.

While support for the relief was clear, several stakeholders cautioned that it should be designed with appropriate safeguards to ensure charities are not burdened with unusable or poor-quality goods, and that eligibility should be broad enough to include key actors within the circular economy. There was also support for complementary measures, such as updated guidance and further regulation to restrict the disposal of unsold consumer goods, to maximise environmental and social impact.

3.2 Government response

The government recognises the strong support from stakeholders for the objectives of the proposed relief and will legislate to introduce a targeted VAT relief on business donations of goods to charity where the goods are for onward donation or use by the charity in its non-business activities. This relief will be designed to encourage the reuse of surplus goods and support the UK’s transition towards a more circular economy.

The government remains committed to ensuring that the relief is practical, balanced, and easy to administer, delivering meaningful benefits for charities, businesses, and the wider community.

4. Goods eligible for the relief

The government asked detailed questions on how the VAT relief could be targeted to capture items which are needed by charities, while limiting the potential for fraud or misuse. This is to ensure the relief is both effective in supporting charitable activity and protecting the integrity of the tax system as VAT is an important source of revenue which helps to fund vital public services, including the NHS, education and defence.

Q9: What is the average value of individual items you donate or receive?

Q10: If a value limit was put on individual items donated, what would be a suitable maximum value?

Q11: What types of goods do you donate or receive (e.g. hygiene products, clothes) and what is the status of the goods (second hand, new stock, end-of-life stock, business returns)?

Q12: If we listed types of goods eligible for the VAT relief, what categories of goods should be included?

Q13: Do you have views on how else we could define which goods are eligible for the relief, or foresee any issues with the options set out above?

Q14: For what purpose do you use donations; to give away to those in need, use in the delivery of services, or another purpose?

Q15: Do you foresee any problems with a relief which included goods for the purpose of distribution to those in need, but not for use in the delivery of a charity’s services?

Value

Most stakeholders expressed a strong preference for a sensible value limit, if a limit is to be imposed. Many agreed the proposed per-item threshold of around £100 would cover the majority of routine donations, but there was concern that such a limit would exclude higher-value goods such as laptops, white goods, and furniture. These are items for which VAT is often the greatest barrier to donation and which are in high demand among charities.

Evidence from larger organisations supported the proposed £100 limit. One major business reported that 90% of their donations were valued below £100, while another noted that the average value of donations they facilitate are around £30. This suggests that a £100 threshold would, in practice, capture most donations.

Some stakeholders did not support having a value limit on the basis that the requirement to value donations is a burden for the donating business, preferring instead to restrict donations by type.

Some respondents advocated for a limit as high as £250 or £500, particularly to include technology and large household items. There was broad consensus that, if a value limit is introduced, it must be updated regularly in line with inflation and subject to periodic review, to avoid becoming outdated and undermining the policy’s effectiveness.

Since a limit is considered necessary to mitigate fraud, respondents urged clarity and simplicity in the valuation method, preferably based on the cost to the donor or a clear market value.

Type

Respondents overwhelmingly favoured a broad, inclusive approach to the types of goods eligible for relief, warning that restrictive or granular lists would risk excluding items of significant social value and create impractical administrative burdens.

Respondents highlighted the importance of including technology, digital devices, and white goods, given their critical role in addressing digital exclusion and supporting basic living standards. There was also recognition that essential non-food items (such as hygiene products, clothing, bedding, and household goods) should be in scope.

However, there was consensus that certain categories for example excise goods (such as alcohol, tobacco, vapes), luxury goods, and high-value electronics should be excluded due to their susceptibility to abuse or onward sale and to protect the integrity of the relief.

Purpose

There was clear support for the relief to apply to goods donated both for onward distribution to those in need and for use in the delivery of a charity’s services. Respondents made clear that, in practice, the distinction between these uses is often blurred, for example, hygiene products may be distributed directly to beneficiaries or used in a shelter’s facilities.

Stakeholders cautioned that restricting the relief to goods for distribution only would create unnecessary administrative burdens, increase complexity for both donors and charities, and risk excluding activities such as soup kitchens, refuges and residential settings.

Respondents highlighted that smaller organisations would face practical challenges in tracking and separating goods by intended use. They considered that a broad approach would better reflect the realities of charitable operations and maximise the value of donations to communities.

4.1 Government response

Following extensive stakeholder engagement and consideration of the associated risks and practicalities, the government has decided to implement the relief with a per-item value limit of £100 for most goods. This approach balances the aim of maximising the benefit of the relief for charities and communities with the need to maintain proportionate safeguards against fraud and abuse. The government considers a threshold necessary to protect public funds and prevent misuse of high-value items.

The government recognises the need to address digital poverty and household hardship and will therefore legislate to introduce an upper value limit of £200 for a specified list of essential goods. This higher threshold will apply to key items such as white goods, furniture, computers, mobile phones and tablets. These categories are considered critical in meeting basic needs and supporting digital inclusion.

As a result of adopting a value-based approach, the government does not intend to impose additional restrictions on the type of goods eligible for relief, with the exception of certain goods subject to excise duty which will be excluded to further reduce the risk of misuse.

The relief will apply to goods donated for both onward distribution and for use in the delivery of a charity’s non-business services allowing charities flexibility to maximise their impact.

5. Recipients eligible for the relief

The government asked a series of questions to determine which organisations and individuals should be eligible to receive goods donated under the VAT relief. The aim was to ensure that the relief is targeted, effective, and minimises the risk of fraud, while also supporting a wide range of charitable activity and community benefit.

Q16: Would limiting the relief to eligible individuals such as those who receive welfare support impact your ability to distribute donations to those in need?

Q17: Would applying a limit on the total value of VAT-free donations an individual could receive impact your ability to distribute donations to those in need?

Q18: What are your views on the types of organisations which should be eligible to receive goods donated under this relief, for example charities, social enterprises and charitable incorporated organisations?

Q19: What are your views on restricting the relief to goods donated to registered charities?

Q20: What are your views on restricting the relief to goods donated to charities with a poverty relief objective, and would such a restriction create any challenges for your current operating model?

5.1 Summary of responses

Eligible organisations

On the question of which types of organisations the relief should be available for, stakeholders expressed a range of views. The majority of respondents advocated for a broad approach, arguing that registered charities, charitable incorporated organisations (CIOs), community interest companies (CICs), and social enterprises should all be eligible to maximise the reach and impact of the relief.

However, the majority of stakeholders also recognised the importance of robust regulatory oversight and the need to protect the relief from fraud or misuse. In addition a substantial minority agreed that restricting eligibility to registered charities (and exempt or excepted charities recognised by HM Revenue & Customs (HMRC)) would be a sensible and practical approach, as these organisations are subject to established governance, transparency, and public benefit requirements. There was also acknowledgement that including unregistered charities or informal groups could increase fraud risks.

On the question of whether the relief should be restricted to charities with a poverty relief objective, stakeholders overwhelmingly opposed such a limitation. Respondents argued that poverty is often the result of complex and interconnected factors, and that many charities (such as those working in health, education, disability, animal welfare, or community cohesion) deliver substantial social value and reach people in need, even if poverty relief is not their explicit primary aim.

Respondents further cautioned that restricting the relief to a narrow subset of charities would risk excluding impactful organisations, create operational challenges, and add unnecessary complexity for both charities and HMRC.

Eligible individuals

Stakeholders overwhelmingly agreed that eligibility for receiving goods under the relief should not be limited to individuals in receipt of welfare benefits, nor should there be a cap on the value of VAT-free donations an individual can receive. Respondents raised practical and ethical concerns, noting that many people in need do not receive welfare support and that such a test could create stigma, deter access, and exclude vulnerable groups such as those on low incomes, asylum seekers, and people experiencing temporary crisis.

Charities also highlighted that tracking individual eligibility or cumulative values would create significant administrative and data-protection challenges, diverting resources from frontline services.

5.2 Government response

The government has decided that the VAT relief will apply to goods donated to charities registered with HMRC for tax purposes and where required, registered with the main charity regulator in each part of the UK: the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland. This includes CIOs, which are regulated by the Charity Commission and subject to the same governance and transparency standards as other registered charities.

The government recognises that CICs and social enterprises play an important role in many communities. However, they are profit-distributing entities which do not benefit from other charity tax reliefs. Including them would therefore create an inconsistency with the principles and logic that underpin existing charity tax reliefs, which reserve these benefits for organisations with wholly charitable aims and structures.

The government recognises that many small charities that are not required to be registered, make a significant contribution at a local level. However, the absence of regulatory oversight over their accounts and trustees presents significant fraud risk, therefore, they will not be included in the scope of this relief. To ensure they are not excluded, unregistered charities that wish to benefit from the relief can do so by registering with HMRC as charities for tax purposes. The registration process is designed to be straightforward and proportionate for smaller organisations.

The government will not restrict the relief to charities with a specific poverty relief objective as it would risk excluding a wide range of deserving charitable causes and would introduce complexity and uncertainty for donors and recipients.

The government will not impose any limits on individual recipients of donated goods. The government recognises that charities are best placed to assess local needs and remains committed to ensuring that the relief is inclusive, workable, and maximises its social and environmental impact.

6. Administration of the relief

The government sought views on how the relief should be administrated by VAT-registered businesses, charities, and HMRC. The consultation explored a range of administrative options with the intention of designing a system that is proportionate, workable and keeps administrative burdens to a minimum. The government’s approach aims to design out opportunities for non-compliance, ensuring the relief operates effectively while minimising risks of avoidance and evasion.

Q21: What are your views on a requirement for businesses to demonstrate that they have delivered, or otherwise made available, goods to an eligible charity?

Q22: If you currently donate goods to be given away free of charge, what records do you keep?

Q23: What are your views on the records in paragraph 5.5 which could be needed to assure compliance with the relief?

Q24: Do you think the option to use a certification system would be effective for this relief?

Q25: If you are a charity which receives donations, what records, if any, do you keep on total donations, and individual recipients of donations?

Q26: What is the scope for limiting the total value of donations an individual receives, or putting in place eligibility criteria for recipients such as the receipt of welfare support?

6.1 Summary of responses

Certification

Stakeholders generally supported the introduction of a certification scheme, particularly one that builds on the existing model for donations of goods for sale by charities. The two main approaches discussed were certification on a per-delivery basis and certification by the recipient organisation on an annual or periodic basis.

Some respondents saw merit in per-delivery certification but noted potential issues if there were discrepancies between what the business thought it had sent and what the charity received. Most respondents preferred a broader version of certification by the receiving organisation, confirming how goods would be used over a defined period.

An important theme was who should bear the compliance risk if goods are not used for charitable purposes. Several stakeholders suggested that the risk should shift to the recipient organisation, as is the case for other VAT reliefs, encouraging donations by reducing the risk for donor businesses.

There was also support for building on existing due diligence processes, with suggestions for responsible signatories (e.g. Trustees or treasurers) and the possibility of linking certification to existing agreements. Some respondents also envisaged a register of eligible organisations as a way to provide reassurance and facilitate compliance.

Delivery Note

There was overwhelming support for requiring some form of delivery note or similar evidence to confirm that goods have been delivered to a charity. Many respondents noted that such documentation is already standard business practice and meets the needs of both donor businesses and receiving charities. Stakeholders recommended that requirements should not be overly prescriptive, allowing businesses to use existing processes and documentation, including digital formats, where possible. While some advocated for an HMRC template, most agreed that flexibility is needed to accommodate different business models and donation types.

There was also recognition that small businesses face proportionately greater burdens, and that requirements should be proportionate. Some stakeholders suggested that low-value or bulk items should not require the same level of documentation as higher-value donations.

Record Keeping

Most businesses and charities reported that they already keep records of donations for stock management and accounting purposes, typically including product codes, descriptions, quantities, and original retail price.

Larger organisations, in particular, already have robust record-keeping systems in place. There was strong support for retaining the types of records listed in the consultation, with many stakeholders noting that these are fair, represent good practice, and are not unduly burdensome.

Stakeholders recommended that requirements should be proportionate, especially for smaller organisations, and that HMRC should not be prescriptive about the format, allowing organisations to build on what they already do.

There was consensus that record-keeping periods should align with existing VAT or accounting obligations.

Valuation Methodology

The valuation of donated goods was a recurring point of discussion throughout the consultation, even though there was no specific question on this topic.

Stakeholders consistently called for a simple and certain approach to valuation, with the most popular recommendation being to use the cost of goods sold as the basis for valuation.

For older or second-hand stock, respondents supported the use of the current valuation rules in Schedule 6 of the VAT Act 1994, which allow a lower value where justified by age or condition. Where it is clear that the value is well below any limit, a reasonable estimate was seen as sufficient.

For items close to the value threshold, a hierarchy of valuation methods, starting with cost price but also allowing for current valuation rules, was seen as helpful. Stakeholders emphasised that HMRC should be flexible in terms of the proof or evidence required to demonstrate that the item value is below the limit, and that estimation should be allowed where the original purchase price is difficult to determine.

6.2 Government response

The government will ensure the administration expected of business is proportionate, particularly for small businesses and low-value or bulk donations. To accommodate different operating models, record keeping requirements won’t be prescriptive but HMRC will provide guidance on how they expect businesses to evidence their entitlement to the relief.

The government has decided that it would be prudent for businesses to demonstrate eligibility for the relief through certification from the charity receiving donations confirming that the goods will be used or distributed for charitable purposes. HMRC will not be prescriptive in the format of certification which they accept as evidence for entitlement to the relief if businesses choose to demonstrate eligibility this way.

Donor businesses will also be expected to retain evidence that goods have been delivered or otherwise made available to an eligible charity. A delivery note or equivalent evidence will therefore form part of standard documentation businesses are expected to keep. There will be no requirement for a standard HMRC template, businesses may use multiple forms of evidence (for example, collection receipts, courier confirmations, or system-generated records) to demonstrate delivery.

Donor businesses will also be expected to keep appropriate records to support claims for relief, which includes details such as product descriptions, quantities, values, and the identity of the receiving charity. This reflects good commercial practice and align with existing VAT and accounting obligations. Businesses will have flexibility in how these records are maintained, including through digital systems.

The government will not impose additional record-keeping obligations on charities. While larger charities may choose to retain records of goods received for operational reasons, this will not be an HMRC requirement. As the relief benefits donor businesses, they remain responsible for ensuring compliance with its conditions.

On valuation the government recognises that stakeholders consistently emphasised the need for simplicity and certainty. The government intends to adopt the cost-of-goods-sold basis as the default valuation method for donated items. Where goods are old, second-hand, or of reduced value, businesses will be permitted to apply a lower valuation consistent with existing VAT principles.

The government’s approach reflects stakeholder feedback and aims to keep the administration of the relief straightforward, proportionate, and aligned with existing business and charity practices. This balanced approach will ensure the relief operates effectively while minimising burdens and supporting greater donations of goods to charity.

7. Next steps

The new VAT relief for business donations of goods to charity will come into force on 1 April 2026 following Royal Assent of the Finance Bill 2025/26.

To support effective implementation, HMRC will publish detailed guidance for businesses and charities on how to use the relief and comply with the associated requirements.

The government hopes that this policy change will enable more goods to reach those in need, reduce unnecessary waste, and support the vital work of charities across the UK.