A significant tax barrier for businesses donating goods to charities has been removed, offering welcome support to local good causes across Herefordshire and Worcestershire.
Businesses can now donate eligible goods to registered charities without incurring VAT, helping charities at a time when donations are under pressure. Recent figures from the Charities Aid Foundation (CAF) show public donations to good causes fell by more than £1.4 billion last year. Millions of people say they can no longer afford to give, with the proportion of people donating dropping from 61% a decade ago to just 50% last year.
How the change helps
Previously, VAT-registered businesses that had reclaimed VAT on goods faced a tax charge when donating them, as HMRC treated the donation like a sale. This often discouraged donations or led businesses to dispose of usable items instead.
Under the new rules, no VAT is due when VAT-registered companies donate eligible goods free of charge to registered charities — provided the items are used to support people in need or deliver charitable services. The relief applies to a wide range of goods, including office supplies, equipment, and surplus stock that many local charities would greatly value.
There is a monetary cap per item, and charities cannot reclaim VAT on the donated goods. Businesses and charities are advised to keep clear records, particularly for higher-value items, to maintain a proper audit trail.
Local impact in Herefordshire & Worcestershire
This change provides a timely boost for charities across the two counties, from supporting vulnerable communities in Hereford and Worcester to rural outreach projects in the surrounding countryside. Local businesses — whether in agriculture, manufacturing, retail or professional services — can now donate surplus goods more easily, strengthening community ties while reducing waste.
Important compliance reminder
Alongside this positive development, HMRC has stepped up oversight of the charity and not-for-profit sector through Structured Risk Reviews (SRRs). Charities and voluntary organisations in Herefordshire and Worcestershire are encouraged to ensure their procedures, financial records and governance are robust and compliant.
A call to local businesses
Many businesses may not have realised donations previously attracted VAT, which may have led them to discard usable goods. Now is an excellent opportunity to review surplus stock and consider donating instead. Local charities often welcome this practical support, helping them continue vital work while supporting broader environmental and social goals.
This VAT relief is a positive step in encouraging corporate giving and supporting charities in Herefordshire & Worcestershire.
