VAT – discounts and free gifts
19/05/2022

When you issue an invoice to your customer, you must ensure that you charge the correct rate of VAT. Whilst most businesses in the UK charge VAT at the standard rate of 20% there are a number of different VAT rates and exemptions that you should be aware of. 

In the UK, there are three separate VAT rates, the standard rate @ 20%, the reduced rate @ 5% and the zero rate @ 0%.

There are special rules when charging VAT where there are discounts or free gifts. The rules are complex, but we have summarised the main aspects below.

Discounts and free gifts

Offer  

How to charge VAT

Discounts     

Charged on the discounted price (not the full price)

Gifts  

Charged on the gift’s full value. There are some specific exceptions on gifts given to the same person if their total value in a 12-month period is less than £50.

Multi-buys  

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

‘Face value’ vouchers that can be used for more than one type of good or service No VAT due, if sold at or below their monetary value

Redeemed face value vouchers

Charged on the full value of the transaction

Redeemed face value vouchers sold at a discount

Charged on the discounted value of the transaction

Link-save offers (buy one get one free or discounted)

VAT is apportioned as mixed-rate goods - there are exceptions


Mold Office

Truwood House
Bromfield Ind Est 
Mold 
CH7 1XB

 

01352 872222 
07429 386274

angela@accountingbookkeeping.co.uk

Mold Location

Oswestry Office

19 Willow Close
Fourcrosses
LLanymynech
SY22 6NF

 

01691 270010
07984 010910 

accounts@accountingbookkeeping.co.uk

Oswestry Location

JUMP TO TOP