You may or may not have heard that the VAT treatment of certain vouchers is due to change from 1st January 2019.
The current position is that VAT is chargeable when the voucher is redeemed for goods and services. Under the new rule vouchers are differentiated into two types – single-purpose vouchers and multi-purpose vouchers. The type of voucher issued will now determine when VAT becomes chargeable.
A ‘single-purpose voucher’ means ‘a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of the issue of the voucher’. This would include a voucher which can only be redeemed by a specific supplier for a particular good or service. Under the new rules, VAT will be chargeable upfront when a single-purpose voucher is issued. The subsequent redemption of the voucher is effectively disregarded.
A ‘multi-purpose voucher’ means ‘a voucher, other than a single purpose voucher’. This would include vouchers which can be redeemed against goods and services with different VAT rates and sold by a variety of suppliers. This would include a typical shopping centre gift voucher which can be redeemed against a magnitude of goods or services, by numerous different suppliers. Under the new rules, VAT will not be chargeable on the issue of a multi-purpose voucher. Instead, VAT will arise when a multi-purpose voucher is redeemed.
For example, if a beauty salon issued a gift voucher that could be redeemed against either beauty treatments or products, then this would be considered a multi-purpose vouchers as the voucher can be redeemed against goods and services that attract different VAT rates. In this case the VAT will only become chargeable when the vouchers is presented for redemption.
If you are unsure how the new rules to the VAT Treatment of Gift Vouchers affects your business please feel free to contact us.