VAT changes to face value vouchers you need to know
- Single Purpose Vouchers (SPVs) and Multi-Purpose Vouchers (MPVs) are treated differently for VAT purposes
- If you sell vouchers, you will need to account for VAT earlier in the sales process than before
- Re-sellers of vouchers will not have to charge VAT
Earlier this year, the tax point for promotional and retail vouchers moved from the point of redemption to the point of sale, leading to implications for a variety of retailers. With the festive season well underway and demand for vouchers reaching its peak, Brent Goodwin, VAT Manager at Newby Castleman chartered accountants outlines the changes businesses should be aware of, both now and going forward.
From 1 January 2019, an EU directive was implemented across the UK with the joint aims of simplifying the rules for the tax treatment of vouchers, and preventing double or non-taxation of goods and services relating to vouchers.
Under the new rules, vouchers issued on or after 1 January this year which have been paid for, and will be used to purchase something, fall into one of two categories:
Single Purpose Vouchers (SPVs)
A voucher is an SPV if, at the time of issue, the place of supply is known and the voucher can only be used to purchase goods or services at the same single rate of VAT.
Multi-Purpose Vouchers (MPVs)
These are vouchers which do not fall within the new SPV criteria.
This is a widening of the definition of an SPV and means that, in many cases, issuers should be accounting for VAT at an earlier date than was previously the case.
There is also a change in the treatment of MPVs. The supply for VAT purposes will only take place when the voucher is redeemed. VAT must be accounted for by reference to the price paid by the last purchaser of the voucher – or, if that price is not known, the face value.
The other significant impact is that intermediaries who merely purchase and re-sell MPVs in their own name will not have to charge VAT, as the sale will not be classed as a supply for VAT purposes.
Whilst this change will have little or no impact for the end consumer, it is a significant one for businesses who provide vouchers – particularly those who sell the majority of their gift cards or tokens in the run-up to Christmas, and may not yet be aware of the new rules.
Brent explains: “What this change means in practice is that retailers are now liable to account for VAT whenever a single purpose voucher is sold, regardless of when – or even whether – it is cashed in.
“This places the VAT accountability on the business selling the voucher at an earlier point in the process than previously, which retailers should bear in mind when planning ahead for the financial year-end and preparing to submit their tax returns.”
Newby Castleman is a Midlands-based independent accountancy firm, with offices in Leicester and Loughborough. It offers a range of specialist financial services, business and tax advice for individuals and businesses.