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HMRC Voucher consultation

HMRC consultation on new EU VAT rules for vouchers

carolineheath 2 January 2018 No comments

HMRC have opened a consultation on the new EU VAT rules for vouchers which will come into effect from 1 January 2019.

The new rules are being introduced after the EU Vouchers Directive was adopted by the EU in June 2016.  Although the UK is in the process of negotiating its exit from the EU, it is still required to implement and apply new EU legislation whilst it remains a full member of the EU. Member States have until 31 December 2018 to transpose the new legislation into their national law.

This consultation is being conducted by HMRC as part of the process of introducing the changes into UK law. The consultation document invites comments on certain aspects of the new rules with a view to identifying any issues that businesses can foresee. It also aims to provide sufficient detail on the changes so that businesses in the voucher industry can start planning for the introduction of the new rules.

Simplification and harmonisation

The aim of the new legislation is to simplify and harmonise the rules on the VAT treatment of vouchers throughout the EU – current differences in national rules have led to instances of double taxation and non-taxation.

The new rules will only affect vouchers (including electronic vouchers) for which a payment has been made and which will be used to buy something.  The changes do not apply to discount vouchers or money-off coupons.  They cover vouchers where the underlying goods or services could be supplied at either standard, reduced or zero VAT rates, or be VAT exempt.

The legislation is only concerned with the question of when VAT is due and not the scope of VAT on vouchers.

Under current UK VAT legislation on vouchers, the customer is deemed to be receiving two supplies – a voucher and an underlying supply of goods or services. The EU Directive however makes it clear that for VAT purposes there will no longer be a separate supply of a voucher. Instead there is only the supply of the underlying goods or services, which will be handed over, or provided, at a date subsequent to the supply of the voucher.

Single purpose and multi-purpose vouchers

The Directive includes definitions for ‘single purpose’ and ‘multi-purpose’ vouchers and sets out the rules for the VAT treatment for both types of voucher.

Single purpose vouchers (SPV) are defined as vouchers 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 issue of the voucher.  This EU definition of an SPV is wider than the one in current UK legislation.

A department store voucher, for example, would not typically be considered a SPV because at the time of issue it is not known what VAT rate would apply on redemption e.g. in UK such vouchers could be redeemed for standard rated clothing or zero-rated food or children’s clothing.

A multi-purpose voucher (MPV) is any voucher which is not a single-purpose voucher.

New VAT treatment

Under the new rules the VAT treatment of vouchers is as follows:

  • VAT is to be charged at the point of issue for SPVs, as well as on any subsequent sale through a supply chain.
  • VAT will only be due on redemption for MVPs, and therefore no VAT will be due on their transfer through a supply chain.  This is because it is only once the voucher is redeemed that the VAT situation becomes clear.
  • VAT is due on any separate supply, for consideration, of intermediary services or distribution or promotion of a MPV.

These new rules will only apply to vouchers issued after 31 December 2018.

This consultation will be of interest to businesses that buy, sell and redeem vouchers and gift cards.

The consultation document can be viewed here.  The closing date for comments is 23 February 2018.

Please get in touch with us if you think your business will be impacted by these changes and you require further information.