Vouchers issued by the same business that will redeem them are known as retailer vouchers. They can take three forms:
- Experience vouchers which have no face value but entitle the bearer to redeem for a specific service;
- Single purpose face value vouchers (SPFVV) which under current rules entitle the bearer to redeem for only one type of goods or services which are all subject to a single rate of VAT; and finally
- Multi-purpose face value vouchers (MPFVV) which can be redeemed for any type of goods or services, subject to different rates of VAT.
If your client issues vouchers which give entitlement to receive a particular beauty treatment, for example, a facial or manicure, the VAT should be accounted for when the voucher is issued or sold, rather than when it is redeemed. This is regardless of whether it is ever redeemed. There is no provision for adjusting the VAT if the voucher is not redeemed before the expiry date.
VAT is also due on the issue of SPFVVs rather than redemption. Recent guidance (https://www.gov.uk/government/publications/changes-to-the-vat-treatment-of-vouchers) published by HMRC details the revised definition of an SPFVV with effect from 1 January 2019. An SPFVV will be defined as one where, at the time of issue, both the VAT liability and the place of supply of the underlying goods or services are known. This widens the definition from the current definition as described in point ii. above.
Rather confusingly, HMRC’s guidance note refers to the current legislation providing for two supplies – one of the voucher and one of the underlying goods or services, with the new measure clarifying that the sale of the voucher will no longer be a separate supply. In practice, retailers will continue to account for the VAT on SPFVVs on an issue if the underlying goods or services are identifiable at the time.
An MPFVV, (unsurprisingly) is any voucher which is not an SPFVV. The treatment of retailer MPFVVs will remain unchanged, with VAT due on redemption, as it is not known at the time of issue what they will be redeemed for.
As a final point, discount or money-off vouchers are not affected by any pending changes. VAT is only ever due on the actual consideration received/payment made.
It is hoped that eventually HMRC will publish comprehensive guidance on all types of vouchers and scenarios involving intermediaries and group discount providers, as the current guidance is piecemeal and dates from 2012 (Notice 700/7 and RCB 12/12).
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