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Gift vouchers and gift cards

A single-purpose voucher can be spent only on goods or services of one type at a single VAT rate. Other vouchers are usually multi-purpose. The type decides when you account for VAT.

Single-purpose vs multi-purpose vouchers

A gift voucher or gift card is classified when issued, by what is then known about the VAT liability and place of supply of the goods or services it buys.

Single-purpose voucher (SPV): Liability and place of supply known at issue; VAT due when sold
Multi-purpose voucher (MPV): Liability or place of supply unknown at issue; VAT due on redemption
SPV example: UK cinema voucher for tickets, in-cinema food or merchandise
MPV example: Department store card covering zero-rated and standard-rated goods
MPV value on redemption: Last known sale price, otherwise face value
Unused vouchers: SPV: no VAT adjustment without a refund; MPV: no VAT due
Rules apply to: Vouchers issued on or after 1 January 2019
Own money-off coupons: Not vouchers; VAT on the amount the customer pays
Third-party money-off coupons: VAT on customer payment plus the manufacturer's reimbursement

Business promotions (VAT Notice 700/7) (opens in a new tab)

Returns and refunds

When customers return goods, adjust your VAT records. Issue credit notes for business customers and reduce output VAT by the VAT element of refunds.

Adjusting VAT on returns

When goods are returned and a refund is issued, you must adjust your VAT records to reflect the reduced consideration.

Full refund: Reduce output VAT by the VAT element of the refund
Partial refund: Adjust output VAT proportionally to the refund amount
Credit notes: Issue credit note showing VAT adjustment for B2B refunds
When to account: In the VAT period when the refund is made
Refund of deposit: If deposit was subject to VAT, refund includes VAT element
Goodwill payments: If no goods returned, no VAT adjustment (unless linked to original supply)
Exchange for different goods: Account as return plus new sale at respective VAT rates
Record keeping: Keep records of returns, credit notes, and VAT adjustments

Loyalty schemes

If you operate a loyalty scheme, the VAT treatment depends on whether points represent a discount on future purchases or something else.

Loyalty points and rewards

The VAT treatment of loyalty schemes depends on whether points represent a discount on future purchases or a separate supply.

Points as discount: If points reduce price paid, VAT is on discounted amount at redemption
Third-party funded points: Complex - may require apportionment between retailer and scheme operator
Cashback: If unconditional cash payment, not subject to VAT (not consideration for supply)
Manufacturer cashback: Customer claims from manufacturer - reduces consideration to manufacturer, not retailer
Points for goods/services: VAT due on value of goods/services supplied when points redeemed
Multi-purpose loyalty cards: Follow MPV rules if can be redeemed at multiple retailers for mixed supplies
Stamp cards: Free item after X purchases - VAT included in earlier purchases, none on free item

Handle vouchers, refunds and loyalty schemes