Businesses that issue or redeem vouchers will be affected by forthcoming changes

14 Mar 2018

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Under an EU directive, rules on vouchers are being streamlined with a new system coming into force from January 2019. Rural businesses that sell or redeem vouchers will be amongst those affected, where vouchers are issued and redeemed for a range of activities, such as entry to historic or other properties and visitor attractions, entry to events, purchase of goods in farm and estate shops, excursions such as wildlife safaris or any other goods or services.

The changes relate to Single Purpose Vouchers (SPVs) and Multiple Purpose Vouchers (MPVs). An SPV is a voucher where the place or supply of goods or services to which the voucher relates (and the VAT due on these goods or services) are known at the time of issue of the voucher. An MPV is defined as a voucher other than an SPV.

Sean McGinness, a VAT Director based in Saffery Champness’ Edinburgh office, comments:

“It is important that businesses understand the supply chain of their vouchers, for example whether they are the party issuing the vouchers or it is a third party. It is also important to understand what vouchers can be redeemed against. Vouchers that can only be redeemed against goods or services that are taxed at one rate of VAT will be taxed on issue. These are termed ‘Single Purpose Vouchers’ and the new rules widen the definition of what is deemed to be an SPV. This means that businesses need to be aware that there could be a potential cash flow impact for vouchers issued after 1 January 2019.”

Furthermore, businesses that currently account for VAT on redemption of all vouchers will lose the cash benefit of non-redemption if they are issuing SPVs after 1 January 2019, due to the widening of the SPV definition.

Sean McGinness comments:

“When a business issues a multi-purpose voucher it is taxed on redemption. If an MPV voucher is never redeemed then it is not taxed. This will continue, but more vouchers will fall outside of the MPV definition. With the widening of the scope of what is an SPV, businesses should consider whether more of their vouchers will now be taxed on issue, and budget for the loss of the non-redemption benefit.”