VATSC03381 - Identifying a supply: Supplies of goods for no consideration: Qualifying charitable donations: Background
This guidance explains the exception from deemed supply charges for qualifying donations of goods made to charities.
If a business has recovered input tax on a business asset and disposes of the asset otherwise than for consideration, then a deemed supply may occur. This means the business must account for output tax on the disposal unless an exception applies.
A new exception was added to VAT Act 1994, Schedule 4, paragraph 5 and applies to qualifying donations made on or after 1 April 2026. This is detailed in Schedule 4, paragraph 5A of the act. It provides an exception to that rule for certain qualifying charitable donations of goods.
The exception will apply to donated goods where all the following apply:
the donation is made to a charity
the value of the donated item does not exceed the applicable limit
the donated items are not excluded
the receiving charity intends to use the donated item for non-business purposes, including onward donation