VAT and vouchers
VAT and vouchers

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • VAT and vouchers
  • Background
  • What is a voucher?
  • General rule
  • Composite transactions
  • Single purpose vouchers
  • Multi-purpose vouchers
  • Intermediaries
  • Practical points

Background

On 27 June 2016, the Council of the European Union passed specific rules for the value added tax (VAT) treatment of vouchers in the form of Council Directive 2016/1065 (Vouchers Directive (EU) 2016/1065). Vouchers Directive (EU) 2016/1065 amends the provisions of Council Directive 2006/112/EC. The aim of the rules is to ensure consistency and uniform VAT treatment of vouchers between Member States. The rules apply to vouchers issued after 31 December 2018. Prior to this date, there was no EU-wide definition of a voucher and certain cross border voucher transactions were not taxed or were subject to double taxation.

Following a consultation by HMRC that ran from 1 December 2017 to 23 February 2018, Finance Act 2019 (FA 2019) transposed the Vouchers Directive (EU) 2016/1065 into UK law for vouchers issued on and after 1 January 2019. The provisions are contained in FA 2019, s 52 and Sch 17 and form Schedule 10B to the Value Added Tax Act 1994 (VATA 1994). Although the UK is no longer a Member State, these provisions continue to apply as they have been transposed into UK domestic legislation.

What is a voucher?

A voucher is an instrument (in physical or electronic form) that meets the following three conditions:

  1. one or more persons are under an obligation to accept the instrument as