Donations to charity

Consultation response: VAT treatment of business donations of goods to charity

16 July, 2025

The ATT has responded to a joint consultation by HMRC and HM Treasury on the VAT treatment of business donations of goods to charity. 

The consultation seeks views on the design of a VAT relief on business donations of goods to charity for distribution to those in need, or use by the charity in the delivery of their services. The government aims to address current inconsistencies in VAT rules, which currently relieve VAT on goods donated to charity for sale, but not for onward donation or the delivery of the charity’s services.

The consultation seeks views on:

  • the different types of operating models used by businesses and charities which would be impacted; 

  • the scope of a relief;

  • the potential benefits, risks, and administrative design of such a relief; and

  • measures to prevent abuse of the VAT system.

As a tax body, the ATT’s response does not address the questions that are directed primarily at charities receiving donations. The key themes from our response include: 

  • We support the introduction of the proposed VAT relief for business donations of goods to charity. The current VAT rules can act as a barrier. A well-designed relief could support circular economy goals, by encouraging the donation of surplus goods and reducing unnecessary waste.

  • Care must be taken to ensure that the relief is not used as a way to offload waste, which could create additional burdens for charities.

  • We do not support the introduction of monetary thresholds or eligibility criteria based on specific types of goods. Such restrictions would reduce flexibility, and fail to reflect the diversity of donors and charities. If any form of definition is deemed necessary, we suggest that a carefully considered exclusion list would be more effective than an inclusion list, as it would allow a broader range of goods to qualify by default.

  • We believe that restricting the relief solely to goods distributed directly to individuals, or to charities with a poverty-relief objective, could limit the effectiveness of the relief and discourage donations.

Overall, we welcome the proposed VAT relief as a positive step, but urge the Government to ensure that its implementation does not add unnecessary complexity.