VAT on gift vouchers - changes from 1st Jan 2019

[Deefer]

I just came across this and it was the first I had heard of it.

As we know, previously there was no VAT to be accounted for on the sale of the actual gift voucher. VAT was only triggered and accounted for when the voucher was redeemed.

However, I have just read this online:

From the 1 January 2019 the way that gift vouchers are treated for VAT purposes has changed.
In the past, the VAT due to HM Revenue and Customs on the voucher sale was declared once the voucher was redeemed for the goods or service, this has now changed and output VAT should be declared on the VAT Return at the point of the voucher sale, rather than the point of redemption. This does not apply for any vouchers purchased before 1 January 2019. This change will not affect discount vouchers.

This change is due to an EU directive, which until we have completed Brexit negotiations, remains in force.

Then giving a bit more detail for the two scenarios of gift voucher:

SPV is a voucher that can be redeemed for goods and services subject to the same VAT rate. VAT is accounted for at the time the voucher is purchased. MPV is a voucher that can be used to pay for goods and services that are subject to different rates of VAT (such as standard, reduced or zero rate).

And this makes things even clearer:

Any SPV issued since 1 January 2019 is subject to VAT at the rate applying to the underlying goods / services at the point of issue. The subsequent redemption of the voucher is effectively disregarded for VAT purposes. As such, the supply of the goods / services is not treated as an independent transaction and the trader is not accountable for VAT on the supply of the goods / services because the VAT was already paid on the supply of the SPV itself.

Where an SPV is not redeemed or is only partially redeemed, no adjustment is made for the non-redemption. Where an SPV is redeemed and additional consideration is also paid to purchase goods / services, then the additional consideration is chargeable to VAT at the appropriate rate at the time of payment or the supply.

So what occurs here? This is the opposite VAT treatment of gift vouchers to what it used to be but I just sold a £100 gift voucher and BP has treated it as zero rate VAT.

[Deefer]

Bit shocked to be told by BP that they will look at this in a future update. Not sure the VAT man will see it that way

I am going to make a change to my shop so I can claim to be MPV and keep VAT on the voucher redemption only.

[Rich]

Bit shocked to be told by BP that they will look at this in a future update. Not sure the VAT man will see it that way

I am going to make a change to my shop so I can claim to be MPV and keep VAT on the voucher redemption only.

You received an initial reply thanking you for letting us know, which stated that we will look at this and the implications for a future update. We need time to read and understand this in detail, and you received an acknowledgement - there is nothing unusual about this.

As you know, we have always met critical deadlines, including GDPR, 3D Secure, etc. We will continue to do so. This just so happened to fly under the radar, despite the fact that we have some fairly large businesses which specialise in gift vouchers. From an initial conversation, it seems that they've been dealing with this in-house.

I now have a UKGCVA Voucher Fact Sheet (UK Gift Card & Voucher Association) which clarifies the matter.

A Single Purpose Voucher (SPV) is defined as:

A voucher where the place of supply of the goods or services to which the voucher relates, and the VAT rate due on those goods or services, are known at the time of issue of the voucher.

This definition will not work for a Bluepark gift voucher, because we host online shops which sell products having full VAT, reduced rate VAT and zero rate VAT.

A Multi Purpose Voucher (MPV) is any other voucher:

If the place of supply is not known, and/or there is more than one VAT rate applicable to the goods/services that be obtained using the voucher, then the voucher will fall within the definition of a MPV.

The following advice is then given:

The issue and subsequent transfer of a MPV is disregarded for the purposes of UK VAT and, therefore, no VAT is chargeable on the issue or subsequent sale/transfer of a MPV.

The redeemer of a MPV must bring output VAT to account at the time that a voucher is redeemed. Output VAT is due based on the nature of goods/services obtained from using the voucher and the amount is based on the face value of the voucher or alternatively, if the final purchase price paid for the voucher is known, output VAT can be accounted for based on this final price.

This sounds very much like the way our system works already.

[Deefer]

Hi Rich,

That is not the reply I received. The reply I got was as follows:

Thanks for letting us know about this change, we will need to consider this for a future update. However, it will require a rewrite of the gift voucher feature.

So yeah, we'll have to agree to disagree on that.

I am more than happy to claim to be of MPV status, as I said above and I'm actually going to add a zero rated item to my shop just to be 100% sure but I can't help thinking that any online retailer selling only standard VAT rated goods would be on a bit of a sticky wicket. They would be an SPV. I think you are looking at this from the point of view of what BP provides not what a BP retailer sells. If a BP shop only sells standard rate VAT goods then they are an SPV. I don't think the fact that BP itself has to cater for different VAT scenarios is the point here.

Anyway, like I say... I am going to get around this by making sure I sell more than just standard rate VATable goods. But if I wasn't I don't think I would be comfortable with your explanation of why nothing will change in BP.

[Neil]

Rich,

I've just had a read through the gov.uk site and i have to say deefer is right here, it really depends on what the store is selling to whether its a single purpose voucher or a multi purpose voucher.

Luckily i sell a large range of 0% and 20% VAT rate products so i am covered by multi purpose, but just reading quickly any selling just Vatable 20% products needs to be booking the VAT at the sale of the voucher.

[PatchworkRabbit]

Is there any update on this, please? I'm about to VAT register and don't have mixed VAT rates.

[Deefer]

As far as I know, the change on 1st Jan 2019 is still exactly as I said above and if you don't have mixed VAT rated products you will have to charge VAT on gift vouchers the new way.

[PatchworkRabbit]

I was hoping for a reply from Rich because I will be using SPVs whereas Rich doesn’t seem to think any change is necessary. I will contact support directly.

[Deefer]

For SPV the VAT needs to be accounted for at the time the voucher is purchased.