There is a change coming on 1 January 2019 regarding the VAT treatment that will effect any retailer that issues gift vouchers.

You may sell gift vouchers on your website to be redeemed at a later date for goods or services. The VAT treatment of a voucher does actually vary depending upon the type of voucher being issued. There are two types of voucher for VAT purposes:

Single Purpose Vouchers (“SPV”) are currently a 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.

Multi Purpose Voucher (“MPV”) are effectively not an SPV. As they could be redeemed for any goods or services which might have different rates of VAT applied to them, the appropriate VAT rate is not known at their time of issue.

The difference in terms of their VAT treatment is that the VAT is payable on an SPV at the time it is issued, whereas the VAT on an MPV is only payable when it is redeemed.

However the above definition will change on 1 January 2019. An SPV will be a voucher that can be redeemed for a range of goods or services, but the VAT rate for all the items is the same and the place of supply is known at the time of issue. An MPV is still a voucher than is not an SPV.

For example a voucher that can be redeemed to purchase CD’s is currently an SPV but one that can be redeemed for CD’s, DVD’s or computer games would not be. From 1 January 2019 this will also be an SPV.

The VAT liability for vouchers will therefore be earlier for many vouchers that are currently issued. In addition to having to account for VAT earlier vouchers that are currently MPVs that will become SPVs will no longer benefit from what is often called “breakage” (non redemption). If an MPV is not redeemed no VAT is due. So for vouchers that are currently MPVs that will become SPVs VAT will be due regardless of redemption.