Is VAT due on business donations of goods to charity in the UK? Usually not, from 1 April 2026. A new relief lets VAT-registered businesses give goods to a registered charity — for the charity’s own use or for onward distribution — without accounting for VAT, as long as each item is worth £100 or less (£200 for certain essential goods) and the business holds evidence from the charity confirming eligibility.
That single change closes a gap that had frustrated businesses and charities for years. Before April 2026, giving away usable stock could cost more in VAT than sending it to landfill. This guide walks through exactly how the new relief works, what still catches businesses out, and how to build a compliance process that will survive an HMRC check.
The 1 April 2026 Shift: Why the Rules Changed
From 1 April 2026, a new exception to the VAT “deemed supply” rule means that most business donations of goods to registered charities — whether for the charity’s own use or for onward giving to people in need — no longer trigger an output VAT charge. This sits alongside the older relief for goods donated to be sold in charity shops, which has always been VAT-free.
The Historical Barrier: The “Deemed Supply” Rule
Under the Value Added Tax Act 1994, if a business had already reclaimed the VAT on goods it bought or made, and it then gave those goods away rather than selling them, HMRC treated that gift as a “deemed supply.” In plain terms, the business had to pretend it had sold the goods to itself and pay 20% output VAT on their value, even though no money changed hands.
This didn’t apply if the goods were donated to a charity shop for resale — that route was already zero-rated. But if a retailer wanted to give surplus stock directly to a food bank, shelter, or community group, the deemed supply rule kicked in. Many businesses found it cheaper, in pure VAT terms, to destroy unsold stock than to donate it. That perverse outcome is exactly what the 2026 reform targets.
The Autumn Budget Announcement and Policy Objectives
The change follows a government consultation launched in April 2025 and a confirmed response published alongside the Autumn Budget on 26 November 2025. HMRC’s stated aims are threefold: make charitable giving of goods simpler and less costly for business, reduce the volume of usable goods sent to waste, and support a more circular economy by keeping stock in use rather than in landfill. The legislation was introduced as Clause 80 of the Finance Bill 2025-26 and took effect on 1 April 2026.
Before vs After: What Actually Changed
| Before 1 April 2026 | From 1 April 2026 | |
|---|---|---|
| Goods donated to a charity for resale (e.g. charity shop) | VAT-free (zero-rated) | VAT-free (zero-rated) — unchanged |
| Goods donated for the charity’s own non-business use | Standard-rated (20%) deemed supply | VAT-free (“outside the scope”), if conditions are met |
| Goods donated for onward distribution to people in need | Standard-rated (20%) deemed supply | VAT-free (“outside the scope”), if conditions are met |
| Value limit on relief | None (relief simply didn’t apply) | £100 per item, or £200 for listed essential goods |
| Evidence required | None specific | Written certification from the charity |
Scope of the New VAT Relief: What Is Eligible?
The relief applies to a genuine, no-strings-attached gift of goods from a VAT-registered business to an eligible registered charity, where the goods are used by the charity in its non-business activities or passed on to an individual, another charity, or another organisation.
Qualifying Charity Use and Purposes
To qualify, the goods must be donated for one of these purposes:
- Use in the charity’s own non-business activities — for example, furniture used in a shelter, or appliances used in a community kitchen.
- Onward distribution to an individual in need — such as household goods passed directly to families the charity supports.
- Onward transfer to another charity or eligible organisation — where the receiving charity redistributes the goods further.
If your business would benefit from a refresher on how VAT registration and reporting works before applying a new relief like this, it’s worth reviewing the basics first.
Which Charities Qualify — and Which Don’t
The receiving organisation must be registered with the Charity Commission (or the equivalent regulator for Scotland or Northern Ireland) where registration is required, or recognised by HMRC for charity tax purposes. Charitable incorporated organisations (CIOs) are included. Community interest companies (CICs) and other social enterprises are specifically excluded, even though they often do similar work — unless they separately hold registered charity status. This is a detail many businesses miss, and it’s worth checking before assuming a “good cause” partner qualifies.
Exclusions and Ineligible Goods
The relief does not cover alcohol or tobacco products liable to excise duty, or vaping products subject to duty. There’s no blanket exclusion for other product categories, but any item priced above the relevant value cap falls outside the relief entirely, not just the amount over the cap.
Monetary Limits and Valuation Rules
The £100 Limit for General Goods
Most donated items qualify for VAT relief only if the value of that individual item is £100 or less. This is assessed item by item — if a business donates a pallet of 100 identical products, each unit is valued separately, not the pallet as a whole.
The £200 Limit for “Essential Goods”
A higher £200 cap applies to a specific list of goods considered essential to reducing hardship: household appliances (cookers, fridges, washing machines, dryers, heaters), furniture including mattresses, flooring such as carpets and rugs, computers and tablets, and mobile phones. HMRC has indicated the value limits and the list of qualifying essential goods can be updated in future, so businesses that donate regularly should check current thresholds rather than assume they’re fixed.
How to Calculate the Value: Lower of Cost or Current Market Value
This is where most guides stay vague. HMRC’s rule is precise: the value of a donated item is the lower of the original cost the business paid to buy or make it, or the amount a donor would have to pay for an identical item today, taking into account its age and condition at the point of donation. If an identical item’s current value can’t be worked out, a similar item’s value can be used instead. Both figures exclude VAT.
In practice, this means genuinely aged, worn or discontinued stock is valued at what it’s actually worth now — not what it cost when new.
| Scenario | Original cost | Current value (age/condition adjusted) | Value used for relief | Cap that applies | Within relief? |
|---|---|---|---|---|---|
| Unsold winter coats, never worn, current season | £18 per coat | £18 (effectively unchanged, still new) | £18 | £100 | Yes |
| Refurbished laptops, 3 years old, upgraded by the business | £600 when new | £150 (second-hand market value) | £150 | £200 (listed essential good) | Yes |
| Refurbished laptops, higher-spec model, still in demand second-hand | £900 when new | £240 (second-hand market value) | £240 | £200 | No — exceeds cap |
| Office chairs, worn, 5 years old | £90 when new | £15 (scrap/second-hand value) | £15 | £100 | Yes |
Where the original cost is genuinely hard to pin down — for example, mixed batches bought at different times — HMRC will accept a reasonable estimate, particularly for items already well under the value limits.
Mandatory Compliance and Record-Keeping
The relief is not automatic. A business must be able to show, if HMRC ever asks, that a donation met all the conditions at the time it was made.
The Charity Certification Requirement: What to Actually Ask For
Vague advice to “get a certificate from the charity” isn’t much use in practice. As a minimum, ask the receiving charity for a written statement containing:
- The charity’s name and registered address.
- Its registration details, including its Charity Commission (or OSCR/CCNI) number, or its HMRC charity tax reference if registration with a regulator isn’t required.
- A signed statement from an authorised official of the charity confirming the goods will either be used in the charity’s non-business activities, or passed on to an individual, another charity, or another organisation.
If a business donates to the same charity regularly, a fresh certificate isn’t needed for every single donation — an annual confirmation of the charity’s status is enough, provided the business keeps its own record of each individual donation.
Evidencing the Audit Trail: What the Business Must Keep
Separately from the charity’s certification, HMRC expects the donating business to hold its own records for each donation, covering:
- A description of the goods and the quantity donated.
- The original purchase price, and the value used for the relief (i.e. your valuation working).
- The date of the donation.
- Details of the receiving charity.
- Proof the goods actually reached the charity — a signed delivery note or inventory, or an equivalent record confirming collection or delivery.
There’s no prescribed format for this proof, but HMRC has said it must clearly show the goods arrived. A copy of the delivery paperwork countersigned by the charity is generally sufficient.
Technical Nuances: The Three VAT Treatments Businesses Now Face
This is the part most commercial guides gloss over, and it’s the detail the Association of Taxation Technicians (ATT) specifically flagged during the Finance Bill’s committee stage.
Zero-Rated, Outside the Scope, or Standard-Rated: Which Applies?
Once the new relief is in force, a VAT-registered business donating goods to charity will actually face three different possible outcomes for what is, in practical terms, the same act of giving something away:
- Donated for resale (e.g. to a charity shop) → zero-rated at 0%, under the long-standing relief in Schedule 8, Group 15, Item 2 of the VAT Act 1994.
- Donated for the charity’s use or onward distribution, and all the new conditions are met → treated as outside the scope of VAT, meaning no VAT is due at all. This is the new relief, created as an exception to the deemed supply rule in Schedule 4 of the VAT Act 1994.
- Donated for use or onward distribution, but the conditions aren’t met — for example, the item exceeds its value cap, the charity isn’t properly registered or recognised by HMRC, or no certification was obtained — → standard-rated at 20%, exactly as before the reform.
The ATT’s genuine concern isn’t that input VAT gets clawed back — where a qualifying donation meets the conditions, the business keeps the input VAT it originally recovered on the goods, because the deemed supply exception removes the requirement to account for output tax in the first place. The real risk is simpler and more practical: businesses now have to correctly identify which of three regimes applies to each donation, and a mistake in that classification — donating an item just over the value cap, or to an organisation that turns out to be a CIC rather than a registered charity — can result in an unexpected 20% VAT liability. The ATT has also warned that the certification and record-keeping burden, if not clearly communicated, could itself discourage some businesses from donating goods at all, undermining the point of the reform.
Corporation Tax and Gift Aid Considerations
VAT relief is separate from corporation tax and Gift Aid, and it’s worth not conflating the three. Gift Aid is a scheme for cash donations — it doesn’t apply to gifts of goods, whether from an individual or a company, so donated stock never generates a Gift Aid claim. On the corporation tax side, businesses that donate trading stock or equipment to a registered charity generally don’t have to record the item’s market value as a taxable receipt, and can typically still claim capital allowances on donated equipment that was used in the business. It’s sensible to check the current corporation tax rate and confirm which business expenses you can claim alongside any donation, since the VAT and corporation tax treatments are assessed independently of each other.
Strategic Business and ESG Impacts
Beyond compliance, the reform gives finance and operations teams a genuine reason to rethink what happens to returns, discontinued lines, and end-of-life equipment. Instead of writing off surplus stock as waste, businesses can now redirect it to charities without the VAT penalty that used to make donation the more expensive option. For companies already investing in eco-friendly business practices, this closes an obvious gap between environmental intent and what actually made financial sense. It also gives ESG and sustainability reporting a concrete, quantifiable line — units diverted from landfill into community use — that’s simple to track using the same records the VAT relief already requires.
Common Mistakes and Edge Cases
- Valuing at original cost instead of current value. The relief looks at the lower of cost or current value — using cost alone can wrongly push an item over the cap.
- Assuming a “good cause” automatically qualifies. CICs and unregistered social enterprises don’t qualify unless they’re also a registered charity.
- Treating a pallet or batch as a single item. Value limits apply per item, not per shipment.
- Skipping certification for one-off donors. Even a single donation needs written evidence from the charity — the annual-update concession only applies to charities you donate to repeatedly.
- Forgetting proof of delivery. A valuation record alone isn’t enough; HMRC also expects evidence the goods actually reached the charity.
- Assuming Gift Aid applies to donated goods. It doesn’t — Gift Aid is a cash-donation mechanism only.
Frequently Asked Questions
Can businesses donate stock to charity VAT-free in the UK? Yes, from 1 April 2026, provided the charity is properly registered or HMRC-recognised, the item’s value is within the £100 (or £200 for listed essential goods) limit, and the business holds written certification from the charity plus its own delivery records.
What are the monetary limits for UK charity donations in 2026? £100 per item for most goods, rising to £200 for household appliances, furniture (including mattresses), flooring, computers and tablets, and mobile phones.
Do I need a certificate from the charity for donated goods? Yes. As a minimum it should show the charity’s name, address and registration details, plus a signed statement confirming how the goods will be used. Regular donors can rely on an annual update rather than a certificate per donation.
Does VAT relief apply to laptops and office furniture donations? Yes, both fall under the higher £200 value cap, provided the value used is the lower of original cost or current market value based on age and condition.
What happens if a donated item is worth more than the cap? The whole item falls outside the relief, and standard-rated VAT at 20% applies under the original deemed supply rules — not just the amount above the cap.
Are community interest companies (CICs) eligible to receive VAT-free donations under this relief? No. Only bodies with registered charity status qualify, even if a CIC carries out very similar charitable work.
Does this VAT relief have any connection to Gift Aid? No. Gift Aid applies only to cash donations from individuals or Gift Aid-style payments and doesn’t apply to gifts of goods from businesses.
