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How Changes To VAT Affect Your Business And Rewards Portfolio

Changes to VAT on Gift Cards and Vouchers came into effect on the 1st of January. You might not have noticed it yet, but some of those shop-specific vouchers you were enjoying before might have become less beneficial to you and your finance teams…


You might have heard about the VAT changes that have come into force around gift cards and vouchers, but not necessarily know the ins and outs of how that's going to affect your rewards portfolio. In short, for many products, VAT is no longer recoverable and you're going to end up spending around 20% more than previously.

However, if it's experience vouchers you've got your eye on, then you're in luck, as rearrangements in classification means you could still nab a VAT-related discount.

Kid grabbing a blue doughnut

In this analogy, the blue doughnut is a discount

Please Note: what we've written here isn't a substitute for legal advice - please consult your company's accounting team, the UKGCVA’s factsheet and the HMRC for more in-depth details


What's Happened with VAT?

For the most part, cards and vouchers that were previously separated into categories like retailer vouchers (John Lewis for example), where the issuer and redeemer are the same entity, and credit vouchers (Love2Shop, Leisure Vouchers etc) which can be used at multiple places.

As of the 1st January 2019, these have now been banded together and classed as ‘Multi-Purpose Vouchers’, so any benefits conveyed by being a ‘retailer voucher’ have now evaporated (the Schedule 10A VAT invoice has gone).

Schedule 10A Evaporating

The Schedule 10A seen here disappearing

What do the VAT Changes Mean?

This has always been the case for non-retailer multi-purpose vouchers (the aforementioned credit vouchers) such as our Leisure Vouchers, Virgin Experience Days Gift Card and the Virgin Gift Card, so luckily for everyone involved there’s no re-training to do as we’re already up to speed on all the necessary processes.

The even better news is that our Virgin Experience Days vouchers are classified as Single-Purpose Vouchers, meaning we can continue to supply a VAT invoice making them an even more cost-effective choice for staff and customer incentives.

A Virgin Experience Days Gift Pack with Confetti

All the more reason to celebrate excellence with Virgin Experience Days


Example

Say your experience budget for the year was £10,000 for this year and last year:

VAT And Rewards in 2018 Border

In 2018 both experience days and retailer vouchers were equally valuable, both allowing a VAT refund of 20% meaning you could purchase 20% more rewards. Multi-retailer vouchers didn’t allow for this rebate.

VAT And Rewards in 2019

In 2019, Retailer vouchers have become Multi-Purpose Vouchers, meaning there’s no VAT to claim back either. Experience days however, having been classified as Single Purpose Vouchers, still benefiting from that tax back. A £10,000 becomes £12,000 via a £12,000 purchase coupled with a 20% VAT receipt.

What that means for rewards

Experiences are now even better value than before. Their high-perceived value to the end-user, coupled with the bonus value you can get compared to cash or multi-purpose vouchers, means you can get an imaginative and thoughtful gift for your employees at less cost to you!

If you want to know more, or how to get more experiences in your benefits and rewards portfolio, get in contact at contact@virginincentives.co.uk or call us on 0330 111 3030.

Photos by Virgin Incentives and:

unsplash-logoPatrick Fore unsplash-logoLuke Besley

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