The Institute of Chartered Accountants in England and Wales (ICAEW) has expressed its support for the introduction of a new VAT relief that will apply to business donations of goods to charities in the UK.
The relief aims to minimise waste and encourage circular economy practices.
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It eliminates the output VAT charge on goods donated to registered charities, whether these items are distributed further or used in providing charitable services.
Goods donated must be valued at £100 or less per item, with an increased cap of £200 for specified essential electrical items such as laptops and white goods.
The provisions are limited to organisations officially recognised as registered charities. Other entities, including community interest companies and social enterprises, will not fall under this VAT relief unless they obtain charity registration status.
The measure was announced by the Chancellor in the Budget and will be introduced from 1 April 2026.
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By GlobalDataICAEW VAT and Customs technical manager Ed Saltmarsh said: “We welcome the move to introduce this VAT relief. The existing VAT treatment creates a perverse incentive: business face no VAT liability when disposing of goods to landfill but may incur one when donating those same goods to charity.
“The change being introduced strikes a sensible balance between simplicity and countering fraud.”
The new provisions are set to be incorporated into the Finance Bill 2025-26. Further details on the implementation and practical aspects of the VAT relief will be outlined in guidance from HMRC.
ICAEW represents more than 210,000 members and students worldwide.
