Autumn Budget 2018 – VAT and vouchers

The application of current VAT rules to the issue of and payment by vouchers is a complex area.

Under current UK VAT legislation, vouchers are either subject to VAT upon issue or when they are redeemed against a supply of goods or services.

Following consultation, new rules will ensure that, from 1 January 2019, there will no longer be a separate supply of a voucher.  There will only be a supply of the underlying goods or services, which will be provided in exchange for the voucher at a later date.

The new legislation will only apply to vouchers issued on or after 1 January 2019 for which a payment has been made and which will be used to buy something. The measure does not apply to vouchers issued before 1 January 2019, the existing rules will continue to apply.

Vouchers will include gift cards and gift tokens, simple book tokens, gift vouchers, and electronic vouchers purchased from specialist businesses. The changes do not apply to discount vouchers or money-off tokens.

This change will affect businesses such as retailers and distributors who issue and redeem vouchers, and also those who buy and sell vouchers.