VAT changes in relation to face value vouchers

HMRC has issued VAT information sheet 09/18 to explain the changes that will apply to face value vouchers issued on or after 1 January 2019. The legislation will be found in Schedule 10B, VAT Act 1994.

There will no longer be a supply of a voucher, or of the right to purchase goods or services using a voucher. Instead, a voucher represents the goods or services to which it relates, and the question is whether the supply of those goods or services takes place at the time of the issue and each successive transfer of a voucher, or when the voucher is redeemed.

Vouchers will represent supplies of goods or services to which they relate. Businesses issuing or transferring vouchers to customers in other EU member states will need to familiarise themselves with the rules that determine where supplies of goods and services take place. See VAT Notice 741A and 700 section 4.8.

From 1 January 2019, the concepts of credit vouchers and retailer vouchers, which are presently described in paragraphs 3 and 4 of Schedule 10A, VAT Act 1994, will disappear. Most of these will fall under the new rules for multi-purpose vouchers, although some will fall within the revised rules for single purpose vouchers.

Presently each transfer (after its issue) of a retailer voucher for consideration is a supply of that voucher. However, from 1 January 2019, while there is a supply of the underlying goods or services when multi-purpose vouchers are issued and transferred, the consideration paid at these stages will be disregarded for VAT purposes. This means that there could be a restriction on the input tax recoverable by businesses buying and selling multi-purpose vouchers.

When a multi-purpose voucher is redeemed for goods or services, the consideration for the supply of those goods or services will be the amount paid for the most recent transfer of the voucher. Where this is unknown, it will be the face value of the voucher.

When one person issues a single purpose voucher (‘the issuer’) and another person redeems it for goods or services (the redeemer, also known as the provider), a supply of those goods or services also takes place by the redeemer to the issuer.

From 1 January 2019, a single-purpose voucher will be defined as one where the place of supply of the underlying goods or services is known (by this, we mean the country in which the supply will take place) and the relevant goods or services have a single liability to VAT (standard rate, zero rate, reduced rate or exempt). As is presently the case, both the issue of a single-purpose voucher, and its subsequent transfer, will represent a supply of the underlying goods or services and any VAT payable is due at this time. The consideration for the supply will be the amount charged for the issue and transfer of the voucher. The persons making these supplies will be entitled to deduct input tax, subject to the normal rules.

Any voucher (other than a discount voucher) which is not a single-purpose voucher will, by default, be a multi-purpose voucher. In the case of a multi-purpose voucher it is not possible (at the time the voucher is issued or transferred) to know this information, and thus the underlying goods or services are only taxed when the voucher is redeemed