The government has launched a consultation on plans to introduce VAT relief on goods donated to charities.

The relief would apply to goods from businesses donated to charities for them to distribute free of charge to those in need or used by good causes in their delivery of services.

“The government recognises the current VAT rules, which relieve VAT on goods donated to charity for sale (for example through a charity shop), but not for onward donation or the delivery of the charity’s services, are not aligned,” states the consultation.

Ministers hope the consultation will help them “to better understand the different types of operating models used by businesses and charities which would be impacted, as well as gathering views on the scope of a relief, particularly eligible goods, and the design of its administration, among other topics”.

James Murray, exchequer secretary to the Treasury, which has launched the consultation with HMRC, said: “Every day British businesses and members of the British public provide essential donations to charities and other organisations which support the most vulnerable in our society.

“We want to make sure that the right tax frameworks are in place to facilitate this giving, and encourage even more generosity.”

He added that the government aims to build on existing tax relief measures, including gift aid, payroll giving and the inheritance tax exemption for charitable bequests.

“I hope this reform will support vital frontline charities and community organisations to deliver their services and provide essential goods to more vulnerable people across the UK,” said Murray.

The consultation closes on 21 July.

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