VQOTW: Donations from sales of goods – Covid support for non-working contractors

My rock band client is not touring or doing live performances at the moment because of the current Coronavirus measures, but they are still generating income from royalties and sales of merchandise including T-shirts and branded face masks. Their self-employed road crew have had no work for months and have no future work lined up in these strange and uncertain times. The band have decided to donate profits from the sales of some of their merchandise to the roadies. The website for online merchandising also provides an opportunity for customers/fans themselves to donate to support the “crew fund”. Are there any VAT implications they need to be aware of?

The first point to be aware of is that, even if the profits are donated, output VAT will still need to be accounted for, based on the liability of the goods, and on the full selling price of the merchandise. While there are special rules concerning sales of donated goods where the proceeds are donated to charity (details can be found in HMRC Guidance Manual VCHAR7200) in this case the goods are not donated, and the recipients of the donations are not charities.

The sale of the goods has a wholly taxable business purpose; therefore, there is no requirement for the band to make any input tax adjustment in relation to the costs of acquiring or selling the goods.

The donation itself will be outside the scope of VAT when received by the Crew. There is no link between the payment and any services to be provided by the crew.

Similarly, donations made by customers on the website, when freely given, are not consideration for any supply of goods or services and will also be outside the scope of VAT. The principle here is the same as that for tips or gratuities, which are outside the scope of VAT when paid without any requirement to do so.


Please share this article with your clients


Our team of experts have a wealth of experience and can also provide a written consultancy service at competitive rates.

Back to Community

0844 892 2776


Croner Taxwise has a history of working with Accountancy Practices going back over 25 years.

We have grown over the years but our core value of outstanding friendly customer service remains at the center of everything we do.

Today our services reach far beyond Tax Fee Protection Insurance as the demands from our Accountancy clients has extended to consultancy support, training, seminars, technical resource and wider business support. In fact, we see our role as being your partner to help you grow and develop your practice and extend the engagement you have with your clients.

My VIP Tax Team VAT question of the week: VAT Exemption for Financial Intermediary Services
My VIP Tax Team VAT question of the week: Upcoming changes to VAT penalties & VAT interest charges
My VIP Tax Team VAT question of the week: Costs in relation to Share Transactions