I own a hair and beauty salon and have recently started to issue gift vouchers. I understand that the VAT treatment depends on the type of voucher, could you please clarify?
Vouchers issued by the same business that will redeem them are known as retailer vouchers and can take three forms: Experience vouchers, which have no face value but entitle the bearer to redeem for a specific service; Single purpose vouchers and Multi-purpose vouchers. Under the current rules a single purpose voucher is a voucher that can be redeemed against goods or services of one type e.g. a facial or manicure, the VAT should be accounted for when the voucher is issued or sold, rather than when it is redeemed and is subject to a single rate of VAT. A multi-purpose voucher can be redeemed for any type of goods or services and VAT is accounted for when redeemed, as it is only at the point of redemption that the VAT rate be identified. New VAT draft legislation has been published which will affect all vouchers issued on or after 1 January 2019. A voucher will be regarded as a single purpose voucher where the place of supply of the ultimate goods or services is known at the time the voucher is issued and where the voucher can only be used for goods/services at a single rate of VAT. VAT will still be due even if it is never used. Any subsequent sale of a single purpose voucher will be treated as a supply of the underlying goods or service and VAT accounted for as appropriate. There are also other changes that will affect the sale of a multi-purpose voucher. The VAT will no longer be due on the price that the voucher was sold for but instead will be due on the price paid by the last person who purchased the voucher or, if that price is not known, on the face value of the voucher. Although an issuer of a multi-purpose voucher will account for VAT at the same time as they do now, from 2019 the VAT may be due on a higher price. The new rules will also affect intermediaries selling multi-purpose vouchers in their own name, as the sale of such will no longer be treated as a supply for VAT purposes. This means that the intermediary will no longer be able to issue a VAT invoice for such a sale and will not be able to recover input tax in relation to the supply of the voucher.
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