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Accounting for vat on gift vouchers

Accounting for vat on gift vouchers


We are currrently selling gift vouchers to members of the public who are allowed to redeem the vouchers at our online retail site. We do not account for vat when the voucher is sold. Vat is accounted for when the goods are sold and the voucher has been redeemed. I understand that there have been changes in the vat treatment of vouchers but these do not apply to us. However, many customers require a vat invoice when they purchase the voucher as they are schools and want to give the voucher to children. Is it better to prepare a vat invoice to send to the school and to simply do a stock adjustment manually when the goods are redeemed at  a later date. Is there any thing wrong with this approach or is it better to stick with our current approach? Does anyone have any other sugggestions?


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22nd Jan 2013 14:38

VAT on gift vouchers

VAT is only due on "single purpose" vouchers if the goods or services they will purchase are standard rated, eg mobile phone top up cards.  See link to HMRC's tax information and impact note:


Otherwise, they are treated as cash at the point of purchase of goods or services, when VAT is accounted for by the seller.  If your retail site sells a variety of items, schools will not know what each pupil has bought with them.  So you will not be able to charge VAT on the sale of vouchers to the schools.


Ring the HMRC VAT help line if you are still not sure.

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22nd Jan 2013 17:10

As the vouchers are being given by the school to the pupil and the pupil redeems the voucje, there is no supply to the school and they have no right to receive a tax invoice as there has been no supply of goods or services to them.

Why do retailers like gift vouchers - well they get the money up front and if the voucher is never redeemed, as many aren't, they don't have to account for VAT.

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