When a charity receives goods, services or facilities instead of money, that’s an in-kind donation. It could be donated laptops, free advertising space or pro-bono legal advice. These contributions are often vital, freeing up cash, filling service gaps and extending reach. 

The challenge is making sure that value is properly recognised. 

Transparent recording of in-kind support shows the full scale of resources at a charity’s disposal. It strengthens confidence with funders, supports audit readiness and helps trustees see how contributions beyond cash sustain the mission. 

But what counts as fair value? And how should it appear in the accounts? 

The next sections break this down step by step, starting with the valuation principles set out in the Charities SORP (FRS 102).

How Should a Charity Put a Fair Value on In-Kind Donations? 

The Charities SORP (FRS 102) is clear: donations of goods, services or facilities must be recognised at fair value on receipt. This means the amount the charity would have paid in the open market. (SORP Module 6) 

For goods, this may be: 

• Published or observable market prices 

• Recent sale prices of similar items 

• Estimated resale value after deducting costs 

Where valuation is not practical, or the cost of doing so outweighs the benefit, recognition can be deferred until the point of sale or use. Materiality is the key test here: would including the item at fair value change a user’s understanding of the accounts?  

The March 2025 SORP update confirms that Module 6 remains unchanged: charities must continue to follow the principles above, but the guidance has been clarified.  

When Should an In-Kind Donation Be Shown in the Accounts? 

The Charities SORP (FRS 102) sets three conditions: 

1. The charity is entitled to the gift. 

2. It is certain the charity will receive it. 

3. A reliable value can be placed on it. 

In practice, this means: 

1. Goods for the charity’s own use – Show the donation as both income and an expense or asset. Example: a donated laptop appears as a donation received and, at the same time, as IT equipment owned. 

2. Goods for resale – If reliable resale values are available, (e.g., donated furniture with clear market prices) record them as stock when received. If reliable values are not available, (e.g. donated clothing in bulk) record the income when the items are actually sold. 

3. Services or facilities provided free or at discount – Where a fair value can be measured, show the donation as income with an equal expense. Example: free venue hire appears as both income received and event costs. 

Why It Matters 

Recognition rules make sure non-cash contributions are reported on the same footing as cash. This shows the full scale of resources available to a charity and gives trustees and funders confidence that accounts reflect reality.  

Donated Services vs Volunteer Time 

Not all in-kind support is treated the same way in the accounts. 

Donated Professional Services and Facilities 

When a charity receives skilled services or the free use of facilities, these can be recognised in the accounts if a reliable value can be placed on them. 

Examples include: 

• A law firm providing pro bono legal advice 

• An advertising agency donating media space 

• A venue offering free hire for an event 

In each case, the value is shown as both income received and an equivalent expense. This ensures the accounts reflect the true cost of the activity, even if no money changed hands. 

Example: If a theatre donates rehearsal space worth £2,000, the accounts show £2,000 as donations received and £2,000 as premises costs. 

General Volunteer Time 

Hours given by volunteers are vital to the sector, but they are not recognised in the Statement of Financial Activities. The reason is simple: it is not possible to measure a fair and consistent value for general volunteering across charities. 

Instead, trustees should highlight volunteer support in the trustees’ annual report. Good practice includes recording the number of volunteers, the roles they play, and the outcomes achieved. This gives stakeholders a fuller picture of how volunteer energy sustains the charity’s mission.

Recording & Disclosure: What Good Looks Like 

How should in-kind donations be recorded so that both auditors and trustees have confidence in the figures? 

Working Papers 

Every in-kind donation should be supported by clear records. At a minimum, note: 

• Date received 

• Description of the item or service 

• Donor details 

• Valuation method used 

• Any restrictions on use 

• Location or stock movement (for goods) 

This record is what auditors will test, and it also ensures trustees can see how valuations have been applied consistently. 

Financial Statements 

Charities must explain in their accounts how in-kind donations are treated. Good disclosure includes: 

• The charity’s policy on donated goods, services and facilities 

• The valuation methods used 

• The main categories of donated items 

• Movements during the year (what was received, used, or sold) 

Example: If a charity receives donated medical supplies worth £10,000, its notes to the accounts should state how the £10,000 was valued, (e.g. supplier price list) and whether the supplies were used directly or held as stock. 

Oversight And Controls 

High-value items should be added to the asset register and covered by insurance. For retail operations, stock controls are essential to track donated goods through to sale.  

Trustees should also expect to see materiality judgements documented showing when detailed valuations were not proportionate to the benefit of users of the accounts. 

When Should a Charity Accept, Refuse, or Return an In-Kind Donation? 

Trustees have a duty to ensure gifts align with the charity’s mission, comply with law, and do not expose the organisation to risk. A written acceptance policy provides clarity and protects both staff and board. 

What a Good Acceptance Policy Covers 

• Mission fit – does the gift support charitable objectives? 

• Compliance and safety – is it legal, safe and appropriate to use? 

• Practicality – can the charity store, transport, or distribute it effectively? 

• Restrictions – does the donor attach conditions that limit usefulness? 

• Reputation – are there ethical or public trust concerns linked to the donor or item? 

• Disposal route – what happens if the item cannot be used as intended? 

Trustee Decision-Making 

The Charity Commission states that trustees must act in the charity’s best interests when deciding whether to accept or refuse a donation. Decisions should be documented, showing how risks and benefits were weighed. Escalation to the board is appropriate where a gift involves significant reputational or operational impact.  

The Fundraising Regulator and NCVO also encourage charities to make acceptance policies public, supporting transparency and trust.  

Retail Gift Aid, Gift Aid & Tax Flags 

Many trustees ask whether Gift Aid applies to donated goods. The answer is straightforward: Gift Aid applies only to monetary donations. A bag of donated clothing does not qualify.  

Where donated goods are sold in a charity shop, Retail Gift Aid can be used. This is an agency model: the donor agrees that the charity will sell items on their behalf and then donate the proceeds as cash. The Gift Aid claim is then made on those proceeds, not on the original goods.  

This requires clear donor agreements, robust till systems and transparent communications. Donors must understand they are donating the sale proceeds, not the items themselves, and consent must be recorded. 

A brief VAT note is also relevant. Sales of donated goods through charity shops are zero-rated for VAT, an important relief that underpins the financial viability of many charity retail operations.  

For trustees, the key is oversight. Gift Aid claims must be backed by proper records and donor consent. Any weakness here can expose the charity to compliance risk and potential clawback by HMRC. 

Making In-Kind Donations Work in Practice 

In-kind donations often provide the hidden fuel that keeps charities running. Valuing and recording them clearly ensures accounts tell the full story of resources supporting the mission.  

Done well, this builds trust with funders, strengthens governance, and gives boards the confidence that every contribution is visible and well-managed. 

Now is a good moment for trustees to review how in-kind support is recorded, disclosed, and reported. For a short check-up on your charity’s approach, speak with a specialist at Charity Accounting Partners.