Monday, 20 May 2024
Monday, 20 May 2024

Boost to everyday charitable donations through new VAT relief

A new VAT relief to encourage businesses to donate everyday items to charity will be consulted on, the Treasury’s tax minister Nigel Huddleston has announced recently.

Currently, firms do not pay VAT on any goods they donate which are then sold on, such as clothes, hygiene supplies and cleaning products. However, if these goods are not sold but are instead distributed free of charge to those in need VAT must be paid for.

The Treasury has today announced it will consult on a new VAT relief for donations of low-value household goods to help encourage donations.

Nigel Huddleston, Financial Secretary to the Treasury said:

“We want the tax system to support donations to charity, not work against it.

“We are consulting on how a VAT relief might boost donations so we can get more items we all rely on every day to those in need and help to alleviate poverty.”

Donations that could be in the scope of the proposed new VAT relief could include anything that may be of use to a household, such as:

  • Hygiene items (soap, toothpaste, toothbrushes, shower gel, toilet rolls)
  • Second-hand items from hotels (e.g. sheets, kettles)
  • Cleaning supplies – including laundry detergent

Helen Dickinson OBE, Chief Executive of the British Retail Council, said:

“Following our representations to the Government, we welcome the consultation into the unequal tax treatment of goods for onward sale compared to those being donated directly to those in need. We hope that the consultation will result in a meaningful change that will boost the charitable work of business in this country.”

Andy Scott, Principal Tax Adviser, Confederation of British Industry said:

“We welcome the government’s announcement to consult on a new VAT relief for charitable donations of everyday items. This progressive step aligns with our calls for a smart tax system that incentivises corporate social responsibility and cuts red tape for businesses wanting to contribute their unsold stock to good causes. By removing the VAT penalty on donated goods, businesses will be more encouraged to support the growth of the civil society sector and the circular economy.

“The proposed VAT relief will lower the cost of generosity, allowing firms to extend their social impact without the deterrent of an additional tax expense or the administrative burden of valuing donated goods. We look forward to working with the government to shape a relief mechanism that maximises the potential for positive change in our communities and simplifies the tax system.”

A barrier to businesses donating goods to charities for distribution to people in need has grown over recent years as firms have had to account for VAT on donations which are not for onward sale.

The Treasury announced that it will launch a 12-week consultation before 23 July 2024. It will consult on introducing a UK-wide VAT relief for a range of low-value household goods which businesses donate to charities to give away free of charge to people in need. The conclusion to the consultation will be announced at a future fiscal event.

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