VAT Relief: Business Donations

Question

Asked by

To ask His Majesty’s Government what assessment they have made of the impact of the VAT relief on business donations on goods to charities on food redistribution networks, including social supermarkets.

My Lords, the new VAT relief on business donations of goods to charity came into effect on 1 April this year and it is too soon yet to assess the impacts. We anticipate the relief will incentivise increased food donations to charities eligible for the relief, meaning increased donations reaching those in need. The CBI estimates that the relief will lead to an additional £72.5 million in total donations annually. We are monitoring any possible impacts on social supermarkets.

My Lords, while the intention of the policy is welcome, does the Minister recognise that it may create a perverse incentive for businesses to divert surplus food away from community organisations and enterprises such as Community Shop, which provide both affordable food and wider support for vulnerable groups? Will he accept any evidence that may come forward as a result of this policy that this perverse incentive is happening and then consider possibly tweaking the policy?

I am grateful to the noble Baroness for her question. The short answer is yes, of course. We are hopeful that this new relief will help boost the supply of essential items to charities, enabling them to reach the people and communities who need them most. The relief will also make it easier for businesses to give surplus stock a second life, supporting families and communities across the UK and strengthening the circular economy by reducing waste and landfill. I hope very much that what the noble Baroness says is not the case. I understand the disappointment of some at not being eligible for this relief. It was important to maintain the structure of existing charity tax reliefs. However, as she asks, we will continue to monitor any potential impacts and accept the evidence. She might like to know that HMT officials will shortly be meeting with the sector to discuss this further.

My Lords, what assessment have the Government made of VAT registration for high street businesses such as mini-markets, vape shops and the like? I recently bought a phone charger and was surprised not to see a VAT receipt, and that business—there are many businesses like this—had significant turnover, well above the VAT threshold. If they are not registered for and not paying VAT, and are not paying national insurance, the minimum wage and corporation tax, that cannot be fair to those legitimate business that do pay their taxes.

I very much agree with the noble Lord. I think we may have discussed this once before, and I agreed with him then as well. As I understand it, HMRC is absolutely cracking down on this type of behaviour.

My Lords, most foods subject to VAT are high in fat, salt and sugar and are often ultra-processed. Is there a danger that VAT relief will increase the donation of such foods to food banks and charities, putting people already at high risk of obesity and diet-related illnesses at even higher risk? Will the Minister consider excluding HFSS foods, at the very least, from VAT relief?

I am aware of the concerns set out by some, including the noble Baroness, about the inclusion of foods high in fat, salt and sugar within the scope of this relief. The work that many of these companies, such as the Company Shop Group, do to support local communities is crucial, and it is important that the new VAT relief does not undermine their ability to do this work. We have not yet been presented with sufficient evidence to justify carving out from the relief foods high in fat, salt or sugar, but Treasury officials will monitor the situation carefully and maintain an open dialogue with the sector.

My Lords, I welcome what the Minister said about this relief. Could he expand on what regard he had to Article 8 of the Windsor Framework, which requires part of the United Kingdom, Northern Ireland, to be aligned with the EU, rather than with the rest of the UK, in VAT and excise duties? Perhaps he could explain that for not just this instance but other instances where relief may not apply in Northern Ireland, part of the United Kingdom.

I have to apologise to the noble Lord, I am afraid, because I do not know the answer to his question about the applicability of this relief to Northern Ireland under the Windsor Framework. I will investigate that and write to him.

My Lords, the banks have opened hubs in some very poor communities. Would it be a good idea for the supermarkets to do the same and put food hubs in decent locations in some of these areas where people find it difficult to get good food?

The location of supermarkets is largely a commercial decision for the supermarkets themselves and not one for me, but I believe that that is exactly what the social supermarkets that the Question relates to are trying to do.

My Lords, we on these Benches very much agree that food and other waste should be minimised, and we sympathise with the objective of this measure. However, are the Government satisfied that the proposal will be effectively administered? I speak, of course, as a former retailer.

I think we are satisfied.