Changes to VAT on vouchers from 1 January 2019
Changes to VAT on vouchers were introduced on 1 January 2019 for vouchers sold on or after that date.
Prior to this change, the sale of a voucher was treated as two separate supplies for VAT purposes; the supply of the physical voucher or gift card; and the underlying goods/services it can be exchanged for.
However, from 1 January 2019 onwards, the sale of vouchers will be treated as a single supply of the underlying goods and services that the voucher can be used to purchase.
Where the goods and services in question all have a single VAT rate (for example a traditional book token) then it is classed as a ‘single purpose voucher’ and VAT will need to be charged on the sale of the vouchers at the relevant VAT rate. This widens the previous definition of single purpose voucher which only applied to vouchers that could only be used for a very specific good or service (rather than a range of goods and services with a single VAT rate), and as a result accounting for VAT on the sale of vouchers will now be more common.
However, where the goods and services that the voucher can be exchanged for have multiple VAT rates, then they are classed as a ‘multi-purpose voucher’ and no VAT is charged on the sale of the voucher, with VAT instead accounted for at the point of redemption.
Key Facts
- From 1 January 2019 the sale of a voucher is treated as the sale of the underlying goods/services
- Single purpose vouchers are those where the goods or services all have the same VAT rate
- VAT is accounted for on single purpose vouchers at the point the voucher is sold
- Multi-purpose vouchers are those where the goods and services have multiple VAT rates
- VAT is accounted for on multi-purpose vouchers at the point the voucher is redeemed
For further advice on this matter, please contact me.
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