A longstanding tax imposed on businesses making charitable donations has been scrapped following a rule change, according to accountancy and advisory firm Azets. The firm is reminding businesses that they can now donate goods to registered charities without incurring a VAT charge.

The development comes amid a period of declining charitable giving. The Charities Aid Foundation (CAF) recently revealed that public donations to good causes plummeted by more than £1.4bn last year. Millions of people said they can no longer afford to give, with just half of the population having donated to charity last year, down from 61 per cent a decade earlier.

Prior to the recent change, if a VAT-registered business made a donation having already reclaimed the VAT paid on those goods, the contribution was ordinarily treated as though the business had made a sale. This meant the business was typically required to pay VAT to HMRC based on the value of the donated goods.

Siobhan Holmes, an Azets partner specialising in not-for-profit accounting, said: “This is excellent news for charities, which we know are receiving less in donations. Essentially, HMRC has confirmed that for VAT-registered companies, no VAT will be due when eligible goods are donated free of charge to registered charities, where those goods are used to support people in need or are to deliver charitable services.

“The changes remove the VAT that previously applied because the business had reclaimed the amount when it originally bought the goods. However, this relief does include a monetary cap per item and charities cannot reclaim VAT on the donated goods.

“Many will be unaware that donations were liable for VAT, but there will also be companies that might have disposed of goods rather than donated them because of the tax they would have to pay.

“We want to get the message out to businesses that they can now donate to charities without falling foul of HMRC.

“Office supplies and equipment, or surplus stock, is often welcomed by charities and there will be other goods that will be of great use to them.

“For their part, charities should make a record of donated goods – especially any expensive items – and keep an audit trail.”

Azets has additionally cautioned charities and not-for-profit organisations to ensure their procedures and records are thoroughly robust in light of new and heightened compliance activity. HMRC has launched a programme of Structured Risk Reviews (SRRs) across the charity and not-for-profit sectors, indicating a more rigorous and data-driven approach to scrutiny.

A HM Revenue and Customs (HMRC) alert has been issued and it comes after an annoucement was made regarding those earning above £50,000. Whilst the advice doesn’t affect everyone, it’s crucial to verify whether you’re eligible to reclaim money, as one woman has highlighted the vital importance of tracking what you’re owed.

Small business accountant Lindie J has shared essential advice for those potentially entitled to additional funds, explaining how individuals could end up paying HMRC more than necessary. It’s particularly noteworthy as there are numerous expenses you can claim for, with drivers having previously discovered they could be overpaying unnecessarily.

Lindie warned: “Not keeping receipts is like trying to claim on insurance without proof. No evidence, no payout. Be honest with me, where are your receipts right now?

“The subscription invoice, the receipt for your new business phone, the train ticket, even the mileage log – that mileage log. Are they stuffed in a bag, fading in the glovebox or buried somewhere in a shoebox or somewhere where you don’t really know?

“I get it. You’re busy running your business, serving clients, juggling family and the last thing on your mind is a little bit of paper but, here’s the thing, not keeping receipts is like trying to claim on insurance without proof.”

She added: “HMRC, they can disallow those expenses and hit you with a higher tax bill. That’s why I always say make it easy for yourself. Snap the receipt as soon as you get it, and you’re done.”

Should you prefer not to accumulate them in a heap or shoebox, she mentioned there are digital applications available to store them all collectively in one location. This naturally makes perfect sense, given that numerous receipts are electronic nowadays.

For individuals eligible to claim business-related expenses, she emphasised it’s crucial to understand this, as it could determine whether you save money or miss out. According to Lindie, it’s absolutely essential information to bear in mind.

What you might not realise is that HMRC can raise your tax bill if you’re unable to supply receipts, or alternative valid evidence, for expenses you’ve claimed. Should you operate as a sole trader or limited company and HMRC launches an investigation into your tax return, you must demonstrate that all business expenses you deducted were legitimate.

Should you lack adequate evidence, HMRC possesses the authority to dismiss your claimed expenses. This results in raising your taxable profits and, consequently, amplifying your tax obligation.

The HMRC website declares: “If you prepare accounts for your business, you will need to choose the dates you keep records to and from. This would usually be the same dates each year.

“It may be easier to complete your tax return if the dates match the tax year (6 April to 5 April). This is because HM Revenue and Customs (HMRC) works out tax based on the tax year.

“If your accounts do not match this, you will need to allocate profits to two different accounting periods. If you do not prepare accounts, you will need to record your income and expenses for each tax year (6 April to 5 April).”

HMRC states you must maintain records of:

• All sales and income
• All business expenses
• VAT records if you’re registered for VAT
• PAYE records if you employ people
• Records about your personal income
• Your grants, if you claimed through the Self-Employment Income Support Scheme

For additional comprehensive details, check the website, which provides extensive guidance on expense recording procedures.

HM Revenue and Customs (HMRC) has said it is “assessing” the impact of its decision to halt the huge £198 million project to create a digital commerce platform. Called the Single Trade Window, it was envisioned under the Conservatives as a technological answer to post-Brexit import and export problems at the border.

The digital platform would have created a single place for traders to upload the proper documentation to transport their goods across UK borders, where currently many have to send the information off to several different agencies before participating in the British economy. But in late November, the government decided to put the Brexit project on ice.

Part of the concerns were a £100m deal signed by HMRC last year with ‘Big Four’ consultancy firm Deloitte and tech partner IBM to deliver the digital post-Brexit trade platform by 2027. This huge consultancy payment represents over half of the project’s total £195m budget.

Labour’s Financial Secretary to the Treasury, Lord Livermore, has now admitted that pausing the project for at least the next two years could pose an issue to the massive contracts signed with Deloitte and IBM. Responding to a question in parliament, he said: “Following the decision to pause work on the Single Trade Window, HMRC is working with its delivery partner to assess the impact of this decision on existing contracts, including an assessment of delivery to date.”

However, the Labour Treasury official added: “There is no formal dispute resolution process running,” regarding the outstanding £100m consultancy contract.

The UK Warehousing Association has slammed Labour’s decision to halt the Single Trade Window, calling it a “key part of the UK’s post-Brexit border strategy.” The trade body continued, saying it did “little to alleviate the uncertainty facing many businesses involved throughout the UK’s critical supply chains.”

In April 2023, then-Prime Minister Rishi Sunak‘s government assigned the project an “amber” rating, Public Technology reports. This rating indicates that: “Successful delivery of the project to time, cost and quality appears feasible but significant issues already exist requiring management attention.

“These appear resolvable at this stage and, if addressed promptly, should not present a cost [or] schedule overrun.”

However, with Labour facing a steep financial challenge, it appears the key post-Brexit trade measure might be in trouble. James Murray, the exchequer secretary to the Treasury, said: “The government is considering its future plans for the border and how best to meet the needs of its users.

“In the context of financial challenges, the government is pausing delivery of the UK Single Trade Window in 2025/26.

“As part of its efforts to support businesses trading across the UK border, the government will consider the role of the Single Trade Window and will provide an update as part of the next phase of the Spending Review, reporting in late Spring 2025.”