Showing posts with label vouchers. Show all posts
Showing posts with label vouchers. Show all posts

Wednesday, November 21, 2018

Change in VAT treatment of retailer vouchers

HMRC issued guidance recently aimed at simplifying the tax treatment of retailer vouchers and at bringing it up to date with a revised EU VAT directive.

Those changes are to be effective January 1st 2019 and even though they may seem like a minor, it could mean significant tax increases for some retailers who will see some of their vouchers reclassified and their VAT treatment altered.

Currently there are 3 different types of vouchers:
  1. Experience vouchers that have no face value but entitle the bearer to redeem a specific service.
  2. Single purpose vouchers (SPVs) which entitle the bearer to redeem for only one type of goods or services which are subject to a single rate of VAT
  3. Multi-purpose vouchers (MPVs) which can be redeemed for any type of goods or services and are subject to different rates of VAT
For experience vouchers and SPVs, VAT needs to be accounted when the voucher is issued or sold rather than when it is redeemed. This is regardless of whether it is ever redeemed. There is no provision for adjusting the VAT if the voucher is not redeemed before the expiry date. The new guidance actually widens the definition of an SPV: going forward an SPV will be defined as one where, at the time of issue, both the VAT liability and the place of supply of the underlying goods or services are known. An MPV is then a voucher which is not a SPV.