VAT treatment of gift cards at Christmas

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 accounted for 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 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 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 accounted for only when the card is redeemed by the end-customer or consumer, and not when the card is sold.  An example is a gift card issued by a High Street bookshop.  Books are zero rate but the shop sells calendars and greetings cards also, which 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 cards.

If you have any questions relating to the above or require any further information, please get in touch with a member of our VAT team.