Implementation of EU Directive on VAT and vouchers – Changes from 1 January 2019

Changes to affect distributor of voucher and issue of multi purpose vouchers

Following a consultation, HMRC is to update the UK VAT legislation this summer for vouchers to bring it up to date with the EU VAT directive.

At the moment VAT must be paid on a single purpose voucher (SPV) when they are issued. VAT due on multi purpose vouchers (MPV) does not have to be paid before the voucher is redeemed. Under the current position a MPV voucher is one which can be redeemed against a range of goods or services even if they are all subject to the same VAT rate.

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 example is a music voucher issued by a retailer. 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.

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 retailer that can be used to buy either a paper book or music. Will the customer redeem the voucher for the next JK Rowling wonder (zero-rated), or a standard rated CD of Spice Girls greatest hits, or  maybe 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.

Part payment

Where vouchers do not cover all of the cost, the balance will be a separate additional supply.


Another big change is  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 also do not affect transport or admission tickets. The changes are also not relevant to the supply of “free offer vouchers” given by business. An example being a hotel giving a free nights hotel stay to a guest in the future, this is still a 100% discount voucher which does fall under SPV or MPV.

If you would like to discuss this blog in more detail please contact Jonathan Main or call 01772 821 021.

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