VAT boost to charitable donations

The Treasury have issued details of a new VAT relief that is aimed at boosting the value of items donated to charities.

It will consult on introducing a UK-wide VAT relief for a range of low value household goods which businesses donate to charities to give away free of charge to people in need. The conclusion to the consultation will be announced at a future fiscal event.

“The Treasury press release says:

“A new VAT relief to encourage businesses to donate everyday items to charity will be consulted on, the Treasury’s tax minister Nigel Huddleston has announced today (18 April 2024).

“Currently 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 paid for.

“The Treasury has today announced it will consult on a new VAT relief for donations of low value household goods to help encourage donations.”

The new VAT relief will not include goods which are donated to charities for them to use, such as new IT equipment. This is to prevent VAT avoidance. For example, the commercial arm of an organisation buying equipment then donating them to a charitable wing to avoid VAT. The consultation will seek views on this.

It will be interesting to see how HMRC will accommodate these welcome changes without adding even more complexity to the UK’s groaning tax rules.