A major VAT reform unveiled in the Budget is expected to unlock millions of pounds’ worth of surplus goods for charity and significantly reduce the volume of usable products sent to landfill.
From 1 April 2026, businesses will be able to donate goods to registered charities without incurring a VAT charge, removing a long-criticised tax barrier that has deterred companies from giving away unsold, returned or surplus items.
Under current rules, gifting goods — even to a charity — can trigger VAT on a “deemed supply” basis, meaning many firms choose to destroy stock rather than shoulder a tax liability. The government says the new relief will eliminate that cost entirely for donations made to HMRC-registered charities.
The decision follows a comprehensive consultation that drew strong support from charities, retailers, manufacturers and waste-reduction bodies. The Treasury said respondents “universally” highlighted the existing VAT charge as a key factor behind unnecessary waste.
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