ICAEW calls for simplicity in VAT relief for charity goods

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged the government to ensure a proposed new VAT relief for donated goods is simple and practical.

In its response to a consultation launched on 28 April, ICAEW said it supported the relief but cautioned against measures that could create unnecessary administrative burdens for businesses, charities or HM Revenue and Customs (HMRC).

Currently, goods given to a charity by a business can only be zero-rated for VAT in limited circumstances. The government is considering expanding the relief but has said safeguards are needed to prevent abuse.

ICAEW, which set out its position in Representation 55/25, said it did not generally back new VAT reliefs, favouring instead a “clear, stable and broad-based” system. However, it said there was a case for change in this instance.

The organisation said the relief should be restricted to donations made to registered charities, as this would provide a “clear and regulated boundary”. It also favoured a certification system to confirm eligibility, rather than placing the responsibility on donors to assess how goods would be used.

ICAEW recommended against imposing value thresholds or categorising eligible goods, arguing that both approaches would “introduce complexity and reduce flexibility”. It also cautioned against restrictions based on the type of charity or whether donations were distributed or used in service delivery, saying these would be “difficult to apply in practice and risk excluding legitimate charitable activity”.