Do I need to charge VAT on gift certificate?

Question

I would like to know if I have to charge VAT on gift certificates.

Thanks.

Answer 1

Face value vouchers (gift certificates) have a monetary face value. These are used instead of money for a future purchase. If you sell them at or below their monetary value, no VAT is due.

When a customer redeems a face value voucher, the transaction is treated as though the face value voucher was cash, and VAT is due on the full value of the transaction. If you can show the voucher had been sold at a discounted amount, VAT is due on the discounted value, rather than the face value of the voucher.

If you give away face value vouchers and redeem them for no further payment, the goods purchased are usually treated as if they were free gifts for VAT purposes.

So basically, yes, you should include VAT in the price of the gift cert but it does not have to be paid to HMRC until it is redeemed at the till.

Hope this helps.

Answer 2

It is just the same as writing a cheque out as giving the voucher  

Answer 3

Yes - but only if you are VAT registered.  

Answer 4

No.  You're selling loans effectively, in promise for a future sale - which will have VAT.  You wouldn't have VAT twice on the same purchase.

Answer 5

Corinne if you are VAT registered you can telephone the VAT office give them full information and ask them any questions that you have - they will be most helpful. You can get the phone number off the back of your VAT return form.