VAT on Vouchers issued by restaurants

New VAT rules for vouchers coming from 1st January 2019

VAT rules are changing from 1st January 2019 for vouchers.

The rules are not concerned with if VAT is due, they concern when it’s due.

New rules apply to any vouchers issued on, or after, 1 January 2019. This legislation only affects vouchers for which a payment has been made and which will be used to buy something.

Vouchers are divided in two types.

Single purpose vouchers (SPV) – A voucher where the place of supply and VAT rate is known.
VAT will be due at the time of payment for the voucher – not at redemption.

Multi Purpose Vouchers – MPVs – A voucher which is not a single purpose voucher. These are effectively gift vouchers, where a payment has been made but the exact nature of what is to be provided is not known at the time of payment.

 

How restaurants will be effected?

Restaurants usually issue SPVs.

Presently, VAT arises when the voucher is redeemed.

Example, if a restaurant sells a voucher for £100 to a customer via an intermediary which acts as the restaurant’s agent. The customer pays the £100 to the intermediary, which passes the money back to the restaurant after having deducted its £5 agent’s commission.  The intermediary also gives an invoice for its commission to the retailer.

The customer goes into the restaurant and spends £150, he pays his bill by redeeming £100 voucher and rest in cash.

The accounting will be as follows:

~ The intermediary will charge the retailer output VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on the total bill of £150 when the voucher is redeemed in its shop.  It will also deduct the input tax on the intermediary’s commission charge.

 

From 1st January, 2019 :

VAT will arise when the voucher is sold to the customer.

The accounting will be as follows:

~ The intermediary will charge the retailer VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on sale of voucher of £100. It will also deduct the input tax on the intermediary’s commission charge.

~ When the customer comes to redeem the voucher. Restaurant will out charge output VAT on £50 as it has already charged VAT on voucher part of the consideration.

 

Conclusion

We accountants will have to change some processes to correctly account for VAT. We will also need to speak with EPOS providers to amend their systems to ensure correct VAT is charged to the customer on sale of goods and services.

Transition – we will have to be mindful of treating vouchers issued before and after 1st January 2019 differently.

 

Source:

HMRC Consultation document

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