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Finance Act 2012

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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Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.

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