I work in small company that does a lot of promotional work to expand its market share. My knowledge on VAT is ok but not that great. Because we are small team I have to deal with all accounting and VAT issues. Could you also clarify following:
1. How VAT works discounts, gifts, vouchers etc?
2. what a single purpose voucher and multipurpose voucher means?
VAT relating to promotional work is quite complex. However here are quick summaries of how each of the items you listed is treated for VAT purposes:
• Discounts – VAT charged on the discounted price (not the full price)
• Gifts – No VAT on <£50 pa gifts. >£50 pa, VAT charged on the gift’s full value.
• Multi-buys – VAT charged on the combined price if all the items have the same VAT rate. If not, VAT is ‘apportioned’ as mixed-rate goods
• Money-off coupons, vouchers etc – no VAT due if given away free at time of a purchase. If not, VAT due on the price charged
• Face value vouchers that can be used for more than one type of good or service (multi-purpose)- No VAT due, if sold at or below their monetary value
• Face value vouchers that can only be used for one type of good or service (single-purpose)- VAT due on the value of the voucher when issued
• Redeemed face value vouchers – Charged on the full value of the transaction at the appropriate rate of the goods provided in return for the voucher
SPV is a voucher that can be redeemed against goods or services of one type which are subject to a single rate of VAT. All other vouchers are considered MPVs. VAT is accounted for on an SPV when issued, as opposed to when redeemed as is the case with an MPV.