A new VAT relief was introduced on 1 April 2026, allowing goods donated to a registered charity – subject to certain conditions – to be given without charging or accounting for VAT. This change should make charitable giving and its VAT implications easier to manage, while also encouraging the donation of surplus stock and helping to reduce waste.
This is a welcome relief that removes the long criticised “deemed supply” rules for qualifying donations.
Deemed supply and current rules
Under previous UK VAT law, if a business donates goods on which it has reclaimed VAT and the goods are not intended for resale – for example, if a charity plans to use them to help people in need or in delivering its services – HMRC treats this as a deemed supply.
In practice, this means the business is required to account for VAT on the donated items, turning what is a generous act into a potentially costly one.
How legislation changed from 1 April
1 April 2026 heralds a new VAT relief that will create an exception to the deemed supply rules. This relief is in addition to the existing zero-rating for items donated for resale, simplifying charitable giving and aligning VAT treatment for different types of donations.
The new rules apply to goods that are donated to registered charities for distribution by the charity to beneficiaries or for use in the charity’s own non-business service delivery (for example, shelters, community kitchens or other free charitable services).
The relief is subject to item-value thresholds:
- A general cap of £100 per item; and
- A higher £200 cap for essential goods, such as white goods, furniture and specified electronics (including computers, tablets and mobile phones).
This represents a significant improvement in the regulatory framework, removing a previous disincentive to donate unsold stock or unwanted assets. Where destruction of surplus goods was once the simpler, VAT-neutral option, businesses can now donate these items to charities for distribution to those in need.
The relief applies to donations made to charities registered with HMRC for tax purposes – small, unregistered charities, community interest companies and social enterprises are excluded.
Alignment of Reliefs
Although this relief is restricted to item-value thresholds, it represents a step toward alignment with relief available under other taxes.
For example, when a company freely gives equipment or trading stock to a charity it may be able to claim tax relief by deducting the value of the donations from total business profits, thus reducing the amount of corporation tax payable.
As an individual, there are different ways to be able to get tax relief on your donations, including through Gift Aid or straight from your wages or pension through a Payroll Giving Scheme.
Optimising the new legislation
Businesses claiming the relief should ensure that they retain evidence that:
- Goods have been delivered or made available to an eligible charity;
- They have obtained certification from the charity confirming that the goods will be used or distributed for charitable purposes; and
- They have ensured that the donation is being freely given (and is not a payment in exchange for any goods or services).
How M+A Partners can help
The introduction of this new VAT relief presents valuable opportunities for both businesses and charities, but it also brings new compliance considerations. Our experienced team can help assess whether proposed donations qualify for the relief, advise on timing and value thresholds, and ensure appropriate documentation and evidence are in place to support VAT treatment.
For any queries on these changes, please get in touch with your usual M+A Partners’ contact or speak to our specialist using the details below.
