Gift in kind charity donations: tax, accounts and the auction room

A gift in kind charity donation is goods or services given instead of money, and very little about it works the way cash does. The relief is different, the accounting is different, and the value on the donor’s email is rarely the value in the room. What the winner pays for it is a different question again: HMRC treats a bid as a purchase, not a gift.

I am Kevin Durham, a professional charity auctioneer and event host. Most gifts in kind I meet have already become a lot or a raffle prize. By the time I have the microphone, somebody has decided what it is worth and what the donor was promised.

This is general information, not advice. Put your own gifts past your own accountant.

What counts as a gift in kind charity donation?

A gift in kind is anything of value given to a charity that is not money. The Charity Commission’s definition of a donation covers “money, land, goods or other property of any kind freely given“, and everything on that list except the money is a gift in kind.

At events it turns up as surplus stock, used equipment, a service the donor normally charges for, an experience such as a cottage weekend, or free use of a venue, which the SORP calls a donated facility.

What does not count as a gift in kind?

A trade discount. SORP 2026 is explicit that commercial discounts in the normal course of trade must not be accounted for as a donation, because the discount is an inducement to buy. A caterer taking 20% off has given you a better price.

Sponsorship. If the business gets advertising, branding or hospitality back, that is a commercial arrangement with its own tax treatment. A sponsor negotiates. A donor does not.

A consignment lot. Goods placed with you by a supplier who takes a cut of the sale price were never donated. I have views about consignment lots, and the room shares them once you explain the split.

Can a charity claim Gift Aid on a gift in kind charity donation?

No. HMRC’s Gift Aid guidance states at paragraph 3.4.5 that a donation must be a payment of a sum of money, and 3.4.6 adds that payments in return for goods, rights or services are not gifts to charity. A donated hamper is not a payment of a sum of money.

Donors are not left with nothing. A company giving equipment it has used claims full capital allowances on the cost, and stock it gives away is left out of its sales income. An individual donating land, property or shares gets income tax and capital gains tax relief. None of that is Gift Aid, and none of it is yours to claim.

One route does end in a claim. Under chapter 3.42, a charity can act as agent, sell goods on an individual’s behalf, and claim Gift Aid on the proceeds the owner donates. The conditions are tight: the owner keeps ownership until the sale, is entitled to all the net proceeds, makes a valid declaration first, and signs a written agreement.

How are donated goods and services recognised in the accounts?

At fair value on receipt, if you can measure it reliably. Accruals accounts follow SORP 2026, which applies to reporting periods starting on or after 1 January 2026, and its module 6 covers donated goods, facilities and services.

• Fair value is normally the open-market price for an identical or comparable item (6.10). With no direct evidence, derive it from the cost to the donor, or, for goods you expect to sell, resale value less the cost of selling (6.11).
• Goods donated for resale are held on trust for conversion into cash, so fair value is likely to be expected proceeds less expected costs of sale (6.26).
• Where measuring fair value on arrival is impracticable, recognise the income when the goods are sold or distributed (6.12).
• Donated services are measured at value to the charity, which cannot exceed market price and is nil where you would never have bought the service (6.16).
• The policy and the amounts go in the notes (6.30).

Not every charity is in this territory. For financial years ending on or after 30 September 2026, a trust or unincorporated association with gross income of £500,000 or less can still use receipts and payments accounts, up from £250,000.

Costing you nothing is no reason to leave a gift out: FRS 102 does not permit non-recognition just because no cost was incurred, per ICAEW guidance reviewed in July 2015.

Volunteer time is the exception

Everybody asks, and the answer is a flat no. SORP 2026 says the lack of a market comparator makes general volunteers’ contribution impracticable to measure reliably, so it must not be included as income (6.18). It goes in the trustees’ annual report instead.

Where a volunteer gives a service they would normally provide as part of their trade or profession for a fee, it can be measured and is recognised. The SORP’s examples are an accountant acting as unpaid independent examiner and a coder building a website to the charity’s brief (6.6). Your stewards are a note. The solicitor who drafted your lot terms for nothing is income and expenditure.

What about VAT when a business donates stock?

A VAT-registered business must normally account for VAT on goods it gives away, but can zero rate them where the gift is made so the charity can sell, hire out or export them.

The charity’s side is in VAT Notice 701/1. Paragraph 5.5.1 zero rates the sale of donated goods, provided they are made available to the general public and were not used for another purpose first. It fails where the sale follows an arrangement made between donor, charity and buyer before the goods went on public offer.

Paragraph 5.5.2 says donated goods sold at a qualifying fundraising event, by auction for example, are zero rated. Bought-in goods at the same event are exempt instead, and exempt is not zero rated. Qualifying events are capped at 15 of the same kind a year per location (5.9.2).

So put it in the ask. “We will sell this at auction, and the auction is open to the public” is the sentence that lets a donor hand over stock cleanly.

How should you value a gift in kind?

Ask for two things: a number, and the evidence behind it. A link, a price list, a receipt, or the donor’s own standard rate.

Then use your judgement, because the accounts and the rostrum want different numbers. The accounts want fair value. I want the figure I can say out loud without one person thinking “no it isn’t”. An over-egged value kills bidding, and the Code of Fundraising Practice says fundraising must not mislead donors with inaccurate information.

Where a gift becomes a lot, that value sets the floor for your reserve price. Write both numbers down the week it arrives.

Acknowledging the gift without promising relief that is not there

Thank the donor properly and say nothing about tax. A letter implying Gift Aid on a donated item is a problem you have made for yourself, and the donor will believe you.

What these donors want is recognition: a name in the catalogue, a logo on screen, a mention from the stage. Agree each separately, because donors say yes to some and no to others. And watch the line: the more a business gets back, the closer this moves to sponsorship.

From the stage my habit is to name the business, say what the gift is, and move on. Gifts sell better when the thank-you is short.

When does a gift in kind cost more than it raises?

When the cost of accepting it, in money, staff hours or risk, outweighs what it brings in. The usual offenders are bulky low-value goods and heavily conditional experiences.

Trustees can refuse. The Charity Commission’s starting point is to accept and keep a donation, but its guidance weighs the cost of complying with a donor’s conditions against the gift’s value, and flags gifts that bring unacceptable burdens. CC20 adds that there is no set amount a charity should spend on fundraising: the decision must be in the charity’s best interests.

Here is the version I see at events. Jigsaw Trust expected £14,000 from their live auction. With their team behind it, the auction generated £27,000, and a live pledge they had not planned raised another £30,600. A room does not reward volume. Ten lots people genuinely want beat fifty that fill a catalogue, and most gifts I turn down go for taking a better lot’s slot.

That is a view, and I hold it firmly. External auction companies arriving with 50 to 100 lots are serving the commission, not the cause. Lots sourced in house keep more with the charity.

Where to start

Build the questions into the ask. A good donation request collects the value, the evidence and the conditions at the moment the gift is offered, the one moment the donor is motivated to answer.

Then decide what each gift is for: sale, use, or distribution. The accounting follows that, and so does whether it belongs in the auction. For a second opinion on which gifts will sell, that is part of what I do as a charity auctioneer, alongside helping charities source auction lots. Call 07596 851647.