The Gift Voucher VAT rate is changing
• Last year the Government lowered some VAT rates to 5%.
• The latest Budget outlines a phased return to the standard rate of 20%.
More information on the changes and what you need to do below.
VAT changes explained
Pre-Covid you would have charged the standard rate of VAT - 20% - on sales of food and non-alcoholic beverages to be consumed on your premises.
The Government have lowered VAT on sales made between 15th July 2020 and 30th September 2021 to 5%.
On the 1st October 2021 VAT will increase to 12.5%, which will be in place until 31 March 2022.
On the 1st April 2022 VAT returns to the standard rate of 20%.
What does this mean for your Gift Vouchers?
Single purpose vouchers e.g., Afternoon Tea can be charged at 5% on purchase regardless of when they are redeemed, providing they are purchased prior to 30th September 2021. Vouchers purchased between 1st October 2021 and 31st March 2022 will be charged at 12.5% VAT. On 1st April 2022 the VAT of sales will revert to 20%.
There is no change to the treatment of the sale of multi-purpose vouchers: the VAT liability for these is determined on redemption. Whether a voucher is a single purpose voucher is determined at the time of first issue and VAT is accounted for at the appropriate rate at that time. There is no scope to revisit the status of either voucher as SPV or MPV after it has been issued.
Therefore multi-purpose vouchers e.g., a stay with dinner can be charged at 5% providing they are redeemed prior to 30th September 2021. For vouchers redeemed between 1st October 2021 and 31st March 2022, the VAT will change to 12.5%. From 1st April 2022 the VAT will then revert to 20%
For a voucher to qualify for the VAT reduction be it multi-purpose or single purpose it must not include alcohol.
For more guidance please visit gov.uk