The government is exploring the introduction of a new VAT relief aimed at incentivising businesses to donate everyday items to charities without incurring VAT liabilities. This proposed relief seeks to encourage donations of essential goods to charitable organisations, ultimately supporting those in need across the country.
Currently, under existing rules, businesses are exempt from paying VAT on donated goods that are subsequently sold by charities, such as clothing, hygiene supplies, and cleaning products. However, if these donated goods are distributed free of charge to beneficiaries, VAT must be accounted for.
The new VAT relief, subject to a 12-week consultation launching before 23rd July 2024, aims to facilitate donations of low-value household items, including:
- Hygiene items (e.g., soap, toothpaste, toothbrushes, shower gel, toilet rolls)
- Second-hand items from hotels (e.g., sheets, kettles)
- Cleaning supplies (including laundry detergent)
It’s important to note that the proposed relief will exclude goods donated for a charity’s use, such as new IT equipment, to prevent potential VAT avoidance.
The consultation period will allow stakeholders to provide feedback and insights on the proposed changes, ensuring that the new VAT relief aligns with the needs and objectives of charitable organisations and businesses alike.
The outcome of the consultation and any confirmed changes will be announced at a future fiscal event, providing transparency and clarity regarding the implementation of the new VAT relief.
This initiative underscores the government’s commitment to supporting charitable activities and fostering partnerships between businesses and charitable organisations. By facilitating tax relief on donated goods, the government aims to enhance philanthropic efforts and make a positive impact on communities across the UK.
Source: HMRC.