VAT and Gift Vouchers
If you are not VAT registered you do not need to apply VAT to your gift vouchers. You can set the VAT for vouchers to 0% and do not need to read any further
The UK government recognises that there are several different sorts of Gift Vouchers with different tax needs. Broadly, these are separated into vouchers where you know what the voucher will be used on at the point the customers buys them, and those where the voucher might be used on a number of different things. If the purpose of the voucher is known up front it is called a Single Purpose Voucher or SPV and VAT must be paid at the point of sale. A Multi Purpose Voucher or MPV doesn't need its tax applied until it is redeemed.
It used to be that vouchers were defined as SPV or MPVs by the products or services associated with them, meaning that store credit or general shopping vouchers would be classed as MPVs and did not need VAT applied until they were redeemed. However, in January 2019 HMRC updated their guidelines so that the definitions now look at whether the VAT rate of the goods or service is known at the point of purchase, rather than what the goods and services themselves are. You can read more about these guidelines on the HMRC website here.
Given the vast majority of goods and services in the UK incur the same VAT rate of 20% this means that most Gift Vouchers are defined as SPVs and must have their VAT paid at point of purchase.
The good news is that Timely is set up to handle this for you. When you create an account based in the UK, we will automatically add an option for 20% VAT into your tax settings. You can use this or add in your own if you are eligible for a lower VAT rate. If you are exempt just leave this empty. We will ask you to confirm which VAT rate should be used for your Gift Vouchers and then will apply this rate during the sale.
"What happens if I sell a voucher which is then used on goods with a different tax rate?"
There may be a situation where you sell a voucher with a 20% VAT rate which is then used against goods with a lower tax rate. Don't worry, in this instance the extra VAT will be added as a tax credit in your financial reporting.