New VAT rules for business donations to charity

New VAT rules for business donations to charity

18 May 2026 | posted in VAT Business tax

From 1 April 2026, the VAT rules for business donations to charity have changed. Under the new rules, VAT is no longer due when goods are donated for:

  • Distribution to people in need
  • Transfer to another charity or organisation
  • Use in a charity’s non-business activities

Previously these types of donations were often treated as ‘deemed supplies’ meaning businesses had to account for VAT at 20%.

The change brings the treatment of donated goods more in line with existing VAT relief for goods donated for resale by charities. The aim is to make it easier and more cost-effective for businesses to donate surplus items – helping reduce waste while supporting organisations such as foodbanks and shelters.

What businesses need to know

While the change is positive, conditions remain. To benefit from VAT relief, all of the following must apply:

  • The goods being donated are eligible
  • The goods are for an eligible use
  • The recipient is a recognised charity, registered with The Charity Commission (or equivalent regulator), or with HMRC for charity tax purposes
  • The donor has records confirming the donation.

HMRC has outlined these rules in its updated VAT Notice 701/1 (section 5.5)

Value limits on donated goods

The new rules include per-item value caps:

  • Up to £200 per item for certain categories:
    • Household appliances (e.g. cookers, fridges)
    • Furniture (including mattresses)
    • Flooring (carpets and rugs)
    • Technology (computers, tablets, mobile phones)
  • Up to £100 per item for all other goods

Any items exceeding these limits may not qualify for the relief.

Excluded goods

Some products are not eligible for VAT relief, including goods subject to excise duty such as:

  • Alcohol
  • Tobacco
  • Vaping products

Non-eligible recipients

Not all organisations qualify. The relief does not apply to donations made to:

  • Community interest companies (CICs)
  • Social enterprises
  • Small charities that are not registered with HMRC

You should check that the recipients meets the eligibility criteria before making a donation.

Record-keeping and compliance

Businesses need to keep clear records of all donations made including:

  • Written confirmation of the charity’s eligible status
  • A signed statement from the charity explaining how the goods will be used
  • Details of the donation, such as:
    • Description and quantity of goods
    • Value (purchase price or value at donation)
    • Date of donation
    • Evidence of delivery or collection.

These records will help demonstrate compliance and reduce the risk of errors or penalties.

Get in touch

If you need advice on the VAT rules for business donations to charity, get in touch today. Contact us for specialist VAT advice at east.midlands@mooreuk.global , fill in our contact form or call one of our offices:

Contributors

Laura Blows

Senior Tax Manager Peterborough

Get in touch