Donated Services: When a Canadian Charity Can and Cannot Issue a Receipt

An accountant closes your year end for nothing. A designer rebuilds your website. Both ask, reasonably enough, for a receipt. The answer is no for the work itself, and yes in two specific arrangements that look similar but are not the same. This guide covers the rule, the two routes around it that CRA accepts, and what each one has to look like in your books.

Why can't a charity receipt donated services?

Because a gift is a voluntary transfer of property, and services are not property. Time, skills and effort do not qualify as gifts for receipting purposes, however valuable the work.

That single sentence decides most of the questions charities get asked in December. The value of the work is irrelevant. So is the fact that the person would have charged $5,000. So is a written statement from the volunteer describing what they gave up.

The rule protects the charity as much as the donor. A receipt for services would state an eligible amount that nothing in your records supports, on a document your registration number appears on, and every receipt you issue has to be supported by your records.

What CRA does allow is receipting a transfer of property that happens alongside the work. There are two such arrangements, and the difference between them is whether money actually moves.

What is a cheque exchange, and when does it work?

Two distinct transactions in sequence: the charity pays for the service, then the same person makes a voluntary gift of money back. Both have to genuinely happen.

The provider gives the service and invoices you for it. You pay the invoice. The provider then chooses, voluntarily, to give all or part of that payment back to the charity as a gift, and you receipt the amount they gave. CRA encourages an exchange of cheques, which leaves both halves visible in two sets of records.

Keep the provider's invoice. It is what shows that the receipt you issued was for a gift of money rather than for the work.

What you must not do is issue a receipt against an invoice marked paid where nothing moved. CRA's stated concern is that such an arrangement raises the question whether any payment was ever transferred in either direction. The exchange is not a paperwork formality, and the gift back has to be voluntary rather than a condition of getting the engagement.

The provider also has to account for the income. The payment they received is remuneration or business income to them, and the fact that they gave it back does not remove it from their return. Say so before the arrangement starts, because a provider who did not expect that outcome will be unhappy in April.

Can you receipt a volunteer's out-of-pocket expenses?

Yes, in either of two ways, but never by simply issuing a receipt instead of paying the volunteer. That last point is CRA's opening statement on the subject.

The first way is the cheque exchange again. You reimburse the volunteer for expenses they incurred on the charity's behalf, and they give the money back voluntarily as a gift. You receipt what they gave.

The second way is narrower and more useful. Where the volunteer has an established right to reimbursement from the charity, you may treat that right to reimbursement as a non-cash gift and issue a receipt for it without money changing hands. CRA says that where a charity wants to receipt in lieu of reimbursement, it should hold a written direction from the volunteer confirming the right to reimbursement and directing the charity to issue a receipt rather than pay.

The right has to exist first. That means a reimbursement policy the volunteer falls within, an expense claim with the supporting receipts, and an amount the charity would have paid had the volunteer asked. Expenses incurred on the charity's behalf qualify; a cost that mainly benefits the volunteer does not.

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What happens when someone donates both materials and labour?

Split the two and receipt only the property. A contractor who supplies lumber and installs it has given you one thing you can receipt and one you cannot.

Value the materials as a gift in kind under the usual rules and receipt that amount. The labour is a service and gets nothing. Ask for an invoice that separates the two, because a single figure covering both cannot be split afterwards on anyone's say-so.

Where the materials are worth more than $1,000, CRA strongly recommends an appraisal by a third party not associated with the donor or your charity, and where an appraisal is done, the appraiser's name and address go on the receipt. No legal threshold attaches to the value; the onus to justify the amount sits with your charity either way.

If the value of the property cannot be determined, no receipt is issued for it. That is the same rule that applies to any gift in kind, and it applies here even though the accompanying work was real and useful.

How do the two transactions get recorded?

Gross, in both directions, never netted into a single entry. Netting hides the transaction that makes the receipt valid.

On a cheque exchange, record the expense at the invoiced amount in the account the work belongs to, and record the gift at the amount given back in donation revenue. The two figures may be identical and they are still two entries. A single net entry of nil leaves you with a receipt and no supporting transaction, which is the position an auditor asks about.

Where the provider is a business rather than an employee, the payment for services may need to be reported on a slip. Fees for services of more than $500 paid to one provider in a calendar year are reported in box 048 of the T4A, and the payroll side of that is covered separately.

Where the provider charges GST or HST, record the invoice and the tax exactly as you would any other invoice. The gift is whatever amount of money the provider voluntarily gave back, which may be the whole tax-inclusive payment or only part of it. Receipt what they actually returned, not what the invoice said.

Keep the receipt number with the transaction pair. When the question later becomes which receipt matched which invoice, the ledger entries are where the answer lives.

Do donated services appear in your financial statements?

Only as a policy choice, and only where three conditions are met at once. The receipting answer and the accounting answer are different questions.

Under the accounting standards for not-for-profit organisations, contributed materials and services may be recognised, as a policy your organisation applies consistently, where the fair value can be reasonably estimated, they are used in the normal course of your operations, and they would otherwise have been purchased.

Volunteer time frequently fails that test, which is why so few charities recognise it. Work your organisation would never have paid for does not become an expense because someone did it for free.

There is a further trap where a funder allows volunteer hours to count toward a matching requirement. Permission to count hours toward a match is not permission to recognise them in your statements, and it is certainly not permission to receipt them. Keep the match on its own schedule, reconciled to the ledger.

On your annual return, none of this reaches line 4500, and nothing about donated services triggers Schedule 5. Line 4890 covers donated goods used in your own charitable activities, which means property; services do not appear there at all.

What do you give someone whose work you cannot receipt?

A written acknowledgement that thanks them and states no value for tax purposes. Get the wording right and the conversation ends there.

Say what they did, say when, and thank them. Do not use the words official receipt, do not include your registration number in a way that suggests one, and do not state a dollar value. A letter that looks like a receipt will be treated as one by the person who files it.

Tell people the rule before they start, not after. A supplier who knows in advance that the cheque exchange is the route will invoice you properly; one who finds out in December feels penalised for helping.

Where you cannot receipt something, there is often another way to recognise it. Naming a volunteer in your annual report is not an advantage, and it costs nothing. A non-charity nonprofit cannot issue official receipts for anything, including property, and gives an acknowledgement instead.

If donated professional work is a regular part of how your organisation operates, the arrangements are worth setting up once with your bookkeeping support rather than case by case, and the sample receipts show what the resulting document should contain.

Frequently Asked Questions

A lawyer did $5,000 of work for us for free. Can we receipt her?

Not for the work. If she invoices you $5,000, you pay it, and she then voluntarily gives the money back, you receipt the amount she gave back. She reports the $5,000 as income either way.

A funder counts volunteer hours toward our match. Can we receipt those hours?

No. Whether hours count toward a funder's matching requirement has nothing to do with receipting, and a charity can never issue an official receipt for donated services.

Our web designer sent an invoice marked paid and asked for a receipt. Can we do that?

No. CRA's position is that a receipt should not be issued to a service provider in exchange for an invoice marked paid, because it raises the question whether any payment moved in either direction.

Does a volunteer need to do anything for the right-to-reimbursement route?

Yes. CRA says the charity should have a written direction from the volunteer confirming the right to reimbursement and directing the charity to issue a receipt rather than reimburse. Keep it with the expense claim.

Can our nonprofit issue a receipt for donated services?

A nonprofit that is not a registered charity cannot issue official donation receipts for anything at all, whether property or services. It can acknowledge the contribution in writing without stating a value for tax purposes.

Someone paid our supplier directly. Is that receiptable?

It depends on what was transferred and by whom, and it is worth checking before you commit to an answer. Arrangements where a third party settles a charity's invoice are a question we handle on our FAQ page.

This article covers the charity's position on donated services as at September 2026, following CRA's gifts of services page and Policy Commentaries CPC-012 and CPC-017. It does not address the service provider's own tax position, which belongs with their advisor. Confirm the current wording of CRA's guidance before changing a reimbursement or receipting policy.