Changes proposed for VAT rules for retailer vouchers

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Neil Warren gives practical examples of the proposed changes to UK law with regard to VAT on face value vouchers, which will take effect from 1 January 2019.

The proposed changes are needed to comply with the EU Vouchers Directive 2016/1065 issued on 27 June 2016. HMRC is consulting on the details to change UK legislation, and the deadline to reply to that consultation is 23 February 2018.

Confusing area

Confession time. I’ve always found the VAT rules concerning face value vouchers to be very tricky to understand. I suspect a lot of clients, tax advisers and even the courts are in the same boat as me. A VAT tribunal report about vouchers is guaranteed to run to many pages. More rule changes are in the pipeline from 1 January 2019, but I hope they will simplify the issues involved.


The starting point is to understand the difference between a Single Purpose Voucher (SPV) and a Multi-Purpose Voucher (MPV). The definitions of these vouchers are changing from 1 January 2019, meaning we will have more SPVs and fewer MPVs:

SPV - current definition

The current definition of an SPV is a face value voucher that can only be used to purchase one type of goods or services, and the VAT rate is known at the time the voucher is issued by a retailer. An easy example is a CD voucher issued by WH Smith. In this case, output tax will be accounted for by the retailer at the time it is paid for the voucher, rather than when the voucher is redeemed at a later date.

SPV - new definition

The new definition of an SPV will include vouchers that can be redeemed for a range of goods or services, but the VAT rate for all the items is the same. So output tax will still be accounted for when the retailer receives payment for the voucher.

SPV – example

A UK retailer issues a voucher that can be used by the customer to buy CDs, DVDs, computer games or computer accessories. Under existing legislation, this voucher is an MPV so output tax is not payable by the retailer until it is redeemed by the customer. Under the new rules, it will be an SPV because all of the goods for which the vouchers can be redeemed are subject to one rate of VAT (standard rate in this situation).

MPV - new definition

An MPV will only include vouchers that can be redeemed for goods or services that are subject to different rates of VAT, so it is impossible to know the actual VAT liability on the purchase until the voucher is redeemed. An easy example is a voucher issued by WH Smith that can be used to buy either a book or CD. Will the customer redeem the voucher for the next JK Rowling best seller (zero-rated), or a standard rated CD of Elton John’s greatest hits, or possibly both? This question can only be answered when the customer redeems their voucher, hence the redemption date is the tax point for VAT purposes and not the earlier date when the voucher was purchased, as is the case with SPVs.


Another proposed change is that SPVs will be within the VAT system when they are transferred via distributors. Distributors trading in these vouchers will be treated as buying and selling the underlying goods or services that can be redeemed with the voucher(s) and claim input tax and charge output tax accordingly.

The exception is if the distributors act as commission-based agents, and do not actually buy and sell the vouchers. They are unaffected by the new rules and will continue to account for output tax on their commission payments.

Other issues

The new rules will not affect transport and admission tickets. They are also not relevant to free offer vouchers given by a business. For example, if a hotel issues a voucher to a departing guest offering a free night’s accommodation at some point in the future, this is a 100% discount voucher and is neither an SPV nor an MPV.

How to respond

You can respond to the consultation by email to [email protected] or post your comments below and AccountingWEB will respond on behalf of the community.

About Neil Warren

Neil Warren

Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.


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22nd Feb 2018 08:39

Hi my company purchases High Street vouchers to give to employees (Staff rewards, etc.) we are not currently charged VAT.
Will we be charged VAT in the future (reclaimable)?

Thanks (0)
22nd Feb 2018 15:19

A social club issues vouchers of a fixed monetary amount as either prizes (for the quiz night for example) or as a thank you to a member who may have volunteered some time or provided ad hoc services free of charge to the club (eg a member who is a plumber assisting with a drainage issue, or a member who is an electrician providing wiring for the TV).

Currently output tax is accounted for as these are redeemed. Would these be treated as an SPV under the new proposals and be taxable at the point they are given away? Or, as they are given away, do they count as 100% discount vouchers like the hotel example and therefore outside the scope of the voucher scheme completely?

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By jain236
15th Mar 2018 12:25

Hi there,
Can you please help me with my question,

I buy Gift cards MPV( tesco, asda, Sainsbury, amazon) from the various friends and local people and sell them to others, I actually don’t buy these cards from any company or retailer directly, so can I call myself as commission based agent? I don’t get VAT invoice from the seller , so do I need to charges VAT when I sell them to someone?

For example.,
John has amazon gift card worth £100 which he don’t want to use and send it to me to sell it to for £80, i find a buyer who is happy to buy it for £90. So I sell it for £90 and give £80 to john and £10 is my commission. i don’t get VAT invoice from John and I don’t charge VAT when I sell it for £90

Do I need to charge VAT when I sell it for £90? Or how does it really work in my case. Could you please help me on this ?

Thanks (0)
09th Oct 2018 19:00

What about distributors who also sell MPVs. How is VAT treated in these cases?

Thanks (0)