Finance Bill 2025-26 briefing: Certain charitable donations not to be treated as supplies of goods

The ATT has produced a Finance Bill 2025-26 briefing on clause 80,  which introduces a ‘VAT relief’ for businesses that donate goods to charities, where certain conditions are met. The measure is intended to address a long-standing inconsistency in the VAT treatment of charitable donations, under which the VAT treatment depends on how the charity uses the donated goods.

Under the current legislation, goods donated by VAT-registered businesses to charities for resale (for example, through a charity shop) are not subject to VAT (zero-rated), whereas goods donated for use by the charity or onward distribution to people in need are usually subject to VAT at 20% (standard rated). Clause 80 seeks to address this inconsistency by allowing certain donations for use or distribution by the charity to be treated as outside the scope of VAT, meaning no VAT is due.

Access to the new relief is subject to several conditions, including item-specific value limits and a requirement for businesses to obtain certification from the recipient charity. There is a risk that these requirements could become burdensome and, in turn, discourage businesses from making donations to charity.

While the new ‘VAT relief’ improves fairness, it does not fully align with the existing VAT relief for donations made to charities for resale. Under the existing legislation, businesses face different VAT outcomes depending on how the charity uses the donated goods. Clause 80 does not remove this complexity but adds a further outcome, under which ‘qualifying charitable donations’ are treated as outside the scope of VAT if specific conditions are met. As a result, businesses will need to continue to navigate these complex rules to determine the correct VAT treatment for what is, in practical terms, the same activity – a donation of goods to charity.

Clear guidance will be essential to help businesses understand when the relief applies, how the item specific value limits apply and what evidence is required.