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Post Info TOPIC: VAT question on vouchers and discounts - internet retail - might be a tough q.


Newbie

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Posts: 3
Date:
VAT question on vouchers and discounts - internet retail - might be a tough q.


Remember when answering that the business is an internet retailer and holds absolutely no stock...

So, here are some scenarios with some questions that I'd like to get
some crystal clear answers for! If I can make the scenarios any
clearer, please let me know, but I suspect I'm already stretched well
beyond the extent of my accounting knowledge here.

1. User A buys a gift voucher, and User B buys a chair using it.

Q1. Was the initial gift voucher purchase subject to VAT? If not, why not?
Q2. What should we be recording against that chair sale? Right now, a
gift voucher would look like any other money source (e.g. like a
credit card)

2. User A buys a gift voucher, and User B buys a lemon squeezer from
us using it.

Q3. Was the initial gift voucher purchase subject to VAT? If not, why not?
Q4. Was the purchase of a lemon squeezer subject to VAT? If not, why not?
Q5. What should we be recording against the sale of the lemon squeezer?

3. User A buys a gift voucher, and User B buys a chair and a lemon
squeezer from us using it.

Q6. Was the initial gift voucher purchase subject to VAT? If not, why not?
Q7. In the subsequent purchase, what value of the sale is subject to VAT?
Q8. On which elements of the subsequent purchase is VAT due? How
should this be recorded?

4. User A buys a gift voucher and a lemon squeezer from us. User B
purchases a lemon squeezer from us using the gift voucher.

Q9. The initial purchase must be subject to some VAT. What is the
effective VAT rate here?
Q10. Does the VAT collected on the initial purchase have any bearing
on the later purchase?
Q11. Assuming the initial purchase takes place at a composite VAT
rate, how does this scenario in general affect the answers to
questions 1, 2, 3, 4, 5, 6, 7 and 8?
Q12. If both the initial purchase and the later purchase have some
kind of composite rate, how on earth can we / should we record this?

5. (In general)

Q13. We have potential voucher sales funding later product sales. What
do we need to record in the two transactions to be able to reconcile
everything effectively?

Thanks for your help on this.



__________________
Prakash Shah


Expert

Status: Offline
Posts: 2256
Date:

Hi

Gift vouchers sold at face value are not subject to VAT. The act of giving vouchers in exchange for money, is not a supply of goods or services.

The following link is a guide

http://www.hmrc.gov.uk/vat/managing/charging/discounts-etc.htm#4

Any goods purchased with the vouchers, are treated exactly the same as if they were paid for by cash/ cheque/ card.

A good place to start with the complexities of VAT is the HMRC website. VAT 700 is the main document to start with.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_001596&propertyType=document

HTH

Bill



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