New rules came into effect on 1 January 2019 to simplify the VAT treatment of face value vouchers. The new rules are intended to harmonise the VAT treatment of vouchers across the EU. The rules seek to define a voucher, including the difference between a single purpose voucher (SPV) and a multi-purpose voucher (MPV) and tax these at different points (issue, transfer, redemption) depending on what is being supplied. HMRC’s commentary on the changes can be found here: VAT Information Sheet 09/18.
To illustrate the changes simply:
Pre 1 Jan 2019
SPVs – represented the right to receive goods or services OF A SINGLE TYPE at a single VAT rate.
MPV – represented the right to receive goods or services where the exact nature of what would be supplied was not known at the time of payment.
Post 1 Jan 2019
SPVs – will represent the right to receive goods or services where both the place of supply of the goods or services to which the voucher relates, and the VAT due, is known at the time of issue.
MPVs – any voucher which is not a SPV.
Many businesses now face practical challenges in implementing the changes, including:
- correctly classifying whether a voucher is an MPV or an SPV;
- updating systems to ensure the correct VAT reporting is being adopted, including potential changes to tax points and values for VAT purposes;
- distinguishing between vouchers issued pre and post 1 January 2019;
- tracking vouchers issued direct to customers versus those issued to intermediaries;
- updating Bespoke Retail Scheme Agreements as a result of the new rules;
- potential input tax restriction in relation to the issue or transfer of an MPV; and
- intermediaries buying and selling vouchers may need to alter their existing supply chain e.g. adopting an agency structure whereby a commission is earnt for distribution or marketing services
- businesses with cross-border supply chains may need to also consider the impact of the new rules in different jurisdictions as, despite the aim of harmonisation, the new rules are being implemented differently in each EU Member State.