VAT relief for goods donated to charities

A new relief is available from 1 April 2026 to remove a VAT charge on goods given by businesses to charities.

Generally, if a business gives away goods which they have bought and claimed VAT on, they need to make an adjustment for VAT on the value given away. Giving goods away is not deemed to be a VATable use, so businesses with good intentions to help charities and reduce waste, faced a tax charge on the value they gave away.

Historically there has been a relief from that requirement if a business gave goods to a charity but only if the goods were going to be sold, exported or let by the charity. So businesses could give excess stock to a charity for sale in their shops without incurring a VAT charge, but if the goods were for use in the charity’s non-business charitable activities, the donor would have to pay a VAT charge.

Following representations by the sector, an additional relief has been added. From 1 April 2026, goods given by businesses for use by charities in their normal charitable activities do not trigger a VAT charge.

This means for example that businesses can give surplus stocks of household goods to food banks without having to pay a VAT charge back on their own return.

For most types of goods there is a limit of £100 per item. Donations of white goods, furniture, computers and mobiles are limited to £200 per item. These values are taken to be the lower of the cost to acquire or produce the goods or the current purchase price of identical goods. Tobacco, vaping and alcohol products are excluded from this relief.

Charities operating furniture or clothing banks and similar activities, where goods are given away as part of their charitable activities will be able to approach potential donors to highlight that they are no longer liable if the items fall below the limits above.