by Meera Rajah
13 November 2023Article
by Meera Rajah
Gifts to suppliers or employees
When goods are provided free to customers, suppliers or employees as corporate gifts, output tax is only due if the value/cost of the gift exceeds £60 (and the goods are standard rather than zero-rate). If the gift cost less than £60 including VAT, input tax can be claimed on the purchase, but no output tax is due on the “deemed supply” of the onward gift. This monetary limit applies to all gifts to the same person in a 12-month period.
Sale of gift cards to the public
A single-purpose voucher (SPV) is a gift card (physical or electronic) that can only be redeemed for goods or services with the same VAT rate. VAT is due when the gift card is sold. An example is an online business that sells cosmetics (no overseas delivery) all VAT standard rate in the UK. Apply the VAT fraction (1/6th) to the retail price of the gift card and declare the VAT at the time of the card sale. The redemption of the goods or services by the customer does not attract VAT. Unfortunately if the gift card is not fully redeemed when it expires, the VAT previously declared cannot be reversed.
A multi-purpose voucher (MPV) is a gift card that can be redeemed for goods or services with different VAT rates. VAT is due only when the card is redeemed by the end-customer or consumer, not when the card is sold. An example is a gift card issued by a High Street bookshop. Books are zero-rate but calendars and greetings cards are VAT standard rate. The income from the sale of the gift card should not be declared on the VAT return. For unredeemed cards, there is no VAT to declare because there has been no supply of goods or services.
There are further VAT rules about Retail Schemes and the wholesale sale of gift cards.
For further information, please speak to the Indirect Tax Services team.