Friday, July 6, 2018
On July 6, 2018, the UK Government issued draft legislation that would transpose new EU value-added tax rules on vouchers into UK law, along with an explanatory memorandum of the changes.
EU member states are required to transpose provisions from the EU Vouchers Directive (Directive 2016/1065) from January 1, 2019, which will harmonize rules on the treatment of vouchers issued from that date.
In the UK, the draft legislation will amend Section 51B of the Value Added Tax Act 1994 as well as Schedule 10A and insert new Sections 51C and 51D and a new Schedule 10B.
The UK Government said the provisions will make the rules for the tax treatment of vouchers consistent, especially where they can be used either in the UK or more widely in the EU. The changes are to prevent either non-taxation or double taxation of the goods or services relating to the vouchers. It affects only vouchers, such as gift cards, for which a payment has been made and which will be used to buy something.
Vouchers issued before January 1, 2019, will be subject to the existing rules.
The EU's Directive is intended to resolve situations where a voucher is issued in one member state and used in another, and where vouchers are traded.
Vouchers include for instance pre-paid telecom cards, gift cards, and price discount coupons for the purchase of goods or services. Narrower in scope than the Commission's 2012 proposal, the Directive defines single-purpose vouchers and multi-purpose vouchers and sets rules to determine the taxable value of transactions in both cases.
Under the Directive, where the VAT treatment attributable to the underlying supply of goods or services can be determined with certainty already upon issue of a single-purpose voucher, VAT should be charged on each transfer, including on the issue of the single-purpose voucher. Under the Directive, the actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher should not be regarded as an independent transaction. Meanwhile, for multi-purpose vouchers, VAT should be charged when the goods or services to which the voucher relates are applied. Against this background, any prior transfer of multi-purpose vouchers should not be subject to VAT.
The UK Government said: "The new legislation is not concerned with the scope of VAT and whether VAT is due, but with the question of when VAT is due and - in the case of multi-purpose vouchers - the consideration upon which any VAT is payable."