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Finance Act 2012

Section 201: Face Value Vouchers


1.Section 201 amends the VAT rules relating to the treatment of face value vouchers. It removes face values vouchers from Schedule 10A to the VAT Act 1994 (‘Schedule 10A’) where they may only be redeemed for one type of good or service and the VAT treatment is known.

Details of the Section

2.Sub-section (1) inserts a new paragraph 7A into Schedule 10A to disapply parts of that Schedule in the case of single purpose vouchers. Single purpose vouchers are defined as those that can only be redeemed for goods or services of one type which are subject to a single rate of VAT.

3.Sub-section (2) stipulates that the changes made by sub-section (1) will have effect from 10 May 2012.

4.Sub-sections (3) and (4) make transitional provision in relation to vouchers affected by the changes made by sub-section (1) that have been issued before the changes made by that sub-section came into force but are redeemed afterwards. In such cases, VAT is deemed to be due on redemption from the person accepting the voucher in return for the goods or services which it is used to obtain.

Background Note

5.This section amends the UK treatment of single purpose face value vouchers in order to conform to EU VAT law. This is the result of a decision of the Court of Justice of the European Union (CJEU).

6.Where a face value voucher can only be redeemed for a single type of good or service, such that the VAT treatment is known at the time that the voucher is sold, there is sufficient information to determine the liability of the supply for VAT purposes.

7.Schedule 10A currently disregards the supply of such vouchers when issued. For VAT to be brought to account, it must be due on redemption. The CJEU has found that this treatment is wrong for single purpose face value vouchers. It is therefore necessary to remove the disregard for these in order to prevent them escaping taxation.

8.Without this section, businesses would be able to put in place arrangements to sell goods or services through the issue of vouchers and avoid having to account for VAT on them.

9.The transitional provisions seek to tax single purpose face value vouchers whose issue escaped taxation under the prior rules and whose redemption is untaxed under the new rules. They are also intended to prevent forestalling of vouchers by the issuing of high values immediately prior to the change.

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