The government is to donate £1.1m, equivalent to the VAT paid on the sale of 888,246 poppies from the memorial at the Tower of London, to armed forces charities.
The net proceeds from the sale for £25 each of the ceramic poppies that form part of the Blood Swept Lands and Seas of Red memorial will be shared equally among six services charities – Cobseo, Combat Stress, Coming Home, Help for Heroes, the Royal British Legion and the Soldiers, Sailors, Airmen and Families Association.
The charities will benefit equally from the donation.
George Osborne, the Chancellor of the Exchequer, said yesterday that the VAT would be refunded in the form of a charitable donation and was being funded using fines collected from banks that manipulated the Libor rate.
Charles Byrne, director of fundraising at the Royal British Legion, said: "The additional income will boost the fundraising efforts all of the charities involved, helping to us support the armed forces community through our welfare work and associated activities."
The installation was created by the ceramic artist Paul Cummins to commemorate the centenary of the first full day of Britain's involvement in the First World War.
The display is due to end on 11 November.