The VAT treatment of vouchers has always been nightmarish and while new rules introduced in January 2019 (read more here) will make for an easier road, until previously issued vouchers have washed through the system we will still have scope for errors and headaches.
Previously we had four different categories of vouchers whereas these have now been boiled down to the following two:
- Single purchase vouchers are those that can only be redeemed against goods or services with a single VAT rate for which the VAT treatment is unchanged. VAT continues to be due on the value of the voucher sale including where the vouchers are passed through a supply chain. As a result VAT is not also then due when the voucher is redeemed.
- Multi-purpose vouchers being those that can be redeemed against goods or services which may have different VAT liabilities. Here VAT only falls due when the vouchers are redeemed.
So, from a standing start if only dealing with vouchers issued after January 2019 the rules are quite straightforward. However, businesses that have previously issued or dealt with vouchers will need to keep track of the different rules during the life-time of vouchers already in the system.
Retailer vouchers which are also multi-purpose vouchers (i.e. may relate to supplies at different VAT rates) that are distributed or bought and sold by intermediaries will need to be tracked so that the correct VAT treatment can be applied.
- If the vouchers were issued before January 2019, VAT is due on redemption according to the value of the original sale to the first intermediary, whereas
- Vouchers issued after January 2019 the VAT is due on redemption.
Credit vouchers have almost not changed and are typically single purchase vouchers.
Other vouchers, while very rare, under the pre-January 2019 rules VAT was due at every stage of their sale so the January 2019 changes are significant, albeit will make life easier in the long run.
If you’re ever not sure about anything related to VAT, why not give us a call? Remember sooner is always better.