The Institute of Chartered Accountants of Scotland (ICAS) has responded to a joint consultation by UK’s HMRC and HM Treasury regarding the extension of VAT relief to business donations of goods to charity. 

The current VAT relief is limited to goods sold by charities, and the proposal aims to include goods donated for charitable use or onward giving. 

In its response, ICAS has supported and highlighted the necessity for a relief system that balances the ease of administrative processes for businesses and charities with measures to prevent abuse.  

They have proposed that the system could be more straightforward if it were limited to registered charities, potentially through a certification process to alleviate concerns about misuse. 

Addressing the consultation’s suggestion of imposing value limits on donations, ICAS concurs that a £100 threshold could be appropriate for many items but may not suffice for all charitable needs.  

The professional body is of the view that varying the limits based on whether goods are for charity use or for distribution to beneficiaries could be considered, although this may introduce practical challenges. 

ICAS has also expressed reservations about basing the relief on lists of eligible goods, arguing that this could lead to administrative complexity and uncertainty.  

Instead, it favours a system based on value limits, with the caveat that valuation challenges must be addressed.  

It proposed using the original purchase price or the lower of the purchase price and value at donation as potential valuation methods. 

The institute also advised against limiting the relief to goods distributed to the needy, recommending a more inclusive approach to the use of donated goods. 

To mitigate the risk of abuse, ICAS recommended excluding donations from connected parties from the relief to ensure that the relief is used in the spirit it is intended and not exploited. 

In June 2025, ICAS stressed the need for long-term financial strategy for Scotland, seeking clarity and a sustainable framework beyond the current Medium Term Financial Strategy to tackle the country’s financial and service delivery challenges.