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VAT treatment of vouchers

A summary of responses to HMRC’s consultation on VAT and vouchers was published on 6 July 2018. The consultation sought views about proposed new rules for the VAT treatment of vouchers and gift cards. The consultation focussed on how an EU directive, providing for the VAT treatment of vouchers, should be transposed into UK law. Broadly, the EU Vouchers Directive (Council Directive (EU) 2016/1065) was agreed on 27 June 2017 and legislates for a common VAT treatment of vouchers across the EU. It applies to any vouchers issued on, or after, 1 January 2019.

The UK has had specific VAT legislation for vouchers for many years but it needs to be brought up to date. The new rules aim to ensure the correct amount of VAT is charged on what the customer pays, irrespective of whether payment is with a voucher or other means of payment.

Draft legislation included in Finance Bill 2018-19 aims to provide new, clear rules which separate vouchers with a single purpose (for example, a traditional book token) from the more complex gift vouchers and set out how and when VAT should be accounted for in each case.

The new legislation is not concerned with the scope of VAT and whether VAT is due, but with the question of when VAT is due and – in the case of multi-purpose vouchers – the consideration upon which any VAT is payable.

Over the coming months, HMRC will consult with various stakeholders about the business impact of the new rules and a Tax Information and Impact Note (TIIN) will subsequently be published on Budget Day. At that time, the expected date of implementation will also be announced.

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