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The government is planning to introduce a new relief aimed at boosting VAT benefits for charitable donations. This proposed VAT relief is intended to encourage businesses to donate everyday items to charities without incurring a VAT liability. A 12-week consultation on these proposed changes will commence before 23 July 2024.

Currently, businesses do not pay VAT on donated goods that are resold by charities, such as clothes, hygiene supplies, and cleaning products. However, if these goods are distributed free of charge to those in need, VAT must still be accounted for.

The proposed relief aims to promote the donation of low-value household items, including:

  • Hygiene products (soap, toothpaste, toothbrushes, shower gel, toilet rolls)
  • Second-hand items from hotels (such as sheets, kettles)
  • Cleaning supplies (including laundry detergent)

The new VAT relief will exclude goods donated to charities for their own use, such as new IT equipment, to prevent any potential VAT avoidance.

The results of the consultation and details of any changes will be announced at a future fiscal event.