06/12/2017.
Vat on vouchers in the EU (UK)
New EU rules governing the treatment from 1 January 2019 of bought vouchers (eg book tokens, gift vouchers, electronic vouchers purchased from specialist businesses) that are used to buy something are explained by HM Revenue & Customs in a consultation that
- i) enables respondents to help determine how they can be transposed into UK law
- ii) draws attention to potential issues
- iii) identifies areas where greater clarity may be required
EU Vouchers Directive (2016/1065), which amends the Principal Vat Directive (2006/112), not only applies to such vouchers issued on or after 1 January 2019 but explains the future Vat treatment for vouchers issued before the new rules start but which are still in circulation.
The UK government supports the Directive, believing it makes the Vat treatment of vouchers simpler and more consistent with key Vat principles. It also considers it reduces uncertainty and facilitates cross EU-border transactions by aligning the rules in member states.
While the directive does not cover discount vouchers or money-off tokens, the types of ‘bought’ vouchers which it covers still comprise a retail market worth around £5bn pa in the UK.
‘VAT and Vouchers’ – which includes an annex setting out both current legislation and the new directive – aims to provide enough detail to enable businesses engaged in the buying, selling or redemption of vouchers to plan for the changes.
It also includes reminders of a number of key Vat concepts, which are reflected in the directive and must be kept in mind when considering vouchers.
It also includes reminders of the following key Vat concepts, which are reflected in the directive and must be kept in mind when considering vouchers –
- the use of vouchers should not interfere with the basic concept that Vat should be charged on the price of consumption, so there should be no difference to the amount of Vat paid with a voucher or with cash or credit card
- with Vat, a payment triggers a tax point that establishes a date on which Vat is due. Vat specific legislation is required for certain vouchers because it is not possible to identify the correct amount of Vat due at this date
- the directive is not concerned with the scope of Vat and whether Vat is due, but only the question of when Vat is due
- the customer was deemed under previous UK Vat legislation to be receiving two supplies – a voucher and an underlying supply of goods or services. The Directive makes it clear that for Vat purposes there is no longer a separate supply of a voucher
- unlike simple payment systems, a voucher carries an entitlement to be accepted as consideration for identifiable goods or services, which a payment system does not
- many tickets and other products, which are not vouchers, may be covered under different Vat legislation, which could have a similar effect to the Vat treatment of certain vouchers under the Directive
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