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Taken at face value
Do you use vouchers in your business? They can be anything which entitles someone to goods or services for less than they would otherwise have to pay in cash - "two for one", "£5 off if you spend £20", "a free bottle of wine with your meal", or simply "to be used instead of £10". If you do, then you should know that the VAT rules for vouchers have changed significantly this year.
The first three are examples of "discount vouchers". They usually just reduce the amount you receive for selling something, and you account for VAT on the reduced amount. The last one is a "face value voucher", which has been treated in the past as if it was cash. That meant that sales of vouchers were ignored, because you don't charge VAT on an exchange of cash for cash.
Now, sales of vouchers by the person who intends to redeem them - such as a retailer selling its own gift vouchers - will still be free of VAT. But most other sales will be
VATable. This has caused an upheaval for the mobile telephone industry, because top-up cards count as face value vouchers.
If you issue, buy, sell or redeem vouchers, we will be happy to advise you on the changes and how they affect your business.
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Customs have issued guidance on how to implement the new rules on vouchers piecemeal, with Information Sheet 03/03 giving some of the picture in April, followed by Business Brief 04/03 in May, and Information Sheet 08/03 giving most of the detail at the end of June (which was a little late, given that the rules had been in force for nearly three months). Now, extraordinarily, another Information Sheet (12/03) has been issued to replace 08/03. It contains only minor changes, so anyone following the previous version should be all right.
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