How to account for VAT on Myndy vouchers

If your business is VAT registered and you haven’t sold gift vouchers before, you may be wondering what VAT decisions you need to make.

The good news is that if you’re supplying goods and services in the UK and your customers are all consumers (i.e. not other businesses), it’s all pretty straightforward. The key question is when do you account for VAT – at the point you sell the voucher or when it is redeemed?

This mainly depends on whether you sell items that attract different rates of VAT or not.

• If your business has a single rate of VAT, you clearly know what rate to apply and you must account for VAT at the point you sell (issue) the gift voucher. In these circumstances, your vouchers are classified as Single Purpose Vouchers (SPVs).
  
  
• If you sell items that attract different VAT rates, then you must account for the VAT when the gift voucher is redeemed. Only then will you know what your customer is going to buy and therefore which VAT rate applies. An example would be a book shop selling books (zero rated) and various book-related items (standard rated). In these circumstances, your vouchers are classified as Multi Purpose Vouchers (MPVs).

VAT accounting gets a little more complex if a gift voucher is bought by a business and some services attract special rules around place of supply. The legislation relating to VAT on gift vouchers also changed with effect from 1 January 2019, resulting in many more gift vouchers being classified as SPVs rather than MPVs. So, whatever your circumstances, please seek guidance from your accountant or suitably qualified financial adviser to ensure you are handling and accounting for VAT accurately.

You can also read full details at www.gov.uk.