Government Launches Consultation on VAT and Charity Donations

The government has launched a new consultation on the VAT treatment of business donations of goods to charity, as part of a broader effort to simplify tax and support charitable giving while preventing abuse of the system.

The consultation, published in spring 2025, seeks to gather feedback on how VAT currently applies to goods donated by businesses and whether reforms could improve the process without opening the door to tax evasion or creating excessive admin for donors.

What’s the Issue?

Under the current VAT rules, when a VAT-registered business donates stock or other goods to a charity, it may still be liable to account for VAT – unless certain exemptions apply. This has created a situation where, in some cases, businesses are discouraged from donating unsold or surplus items because of the VAT implications.

The government is now reviewing whether these rules could be revised to encourage more donations, reduce waste, and support the charitable sector, while still maintaining proper controls to prevent fraud or misuse.

What Is the Consultation Exploring?

The consultation is asking for views on:

• What types of goods are typically donated

• How goods are distributed once donated

• Whether current rules are overly complex or discourage donations

• How a balance can be struck between encouraging giving and maintaining VAT compliance

This is a welcome opportunity for charities, retailers, manufacturers and tax professionals to provide input on how VAT policy could be improved in this area.

You can view the full consultation document here. https://www.gov.uk/government/consultations/consultation-on-the-vat-treatment-of-business-donations-of-goods-to-charity

What Does It Mean for You?

If your business donates goods to charity – or is considering doing so – this consultation could lead to changes in how VAT applies to those donations. For now, the current rules remain in place, but it's wise to keep an eye on developments, especially if your business has been holding back on giving due to the VAT burden.

At SJC Chartered Accountants, we’ll be monitoring this closely and are happy to advise on how the rules currently apply to your situation – and what any future changes could mean for your organisation.