Is there VAT on Supermarket gift cards?

blue_monkey_2

I put some money for someone on an Asda gift card and I was not sure whether VAT applied. Does anyone know?

It was for someone who ran my business while I was away but refused to tell me how many hours she did so I could pay her. This seemed the easiest way to show her my gratitude because she did not know how much was on it until she got into the store. I just wanted to know if I could claim any VAT back on it or not. Tesco usually put a star next to their Vatable items but Asda do not as I bought something else and their is nothing that says it has VAT charged on it but it is definately a vatable item.

Thanks.

dzug1

Not VATtable:

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

Leela

No, VAT is not applicable because a gift card is just an equivalent to cash that can only be spent in that store.

paddyrg

And as it would be the recipient benefitting from the goods, not the business, the business has no interest in the VAT part of the transaction.

But hurrah for lovely you giving the friend a gift card! Make sure it has no expiry date, or make her aware of it if there is one - that's where gift cards let themselves down!

blue_monkey_2

Thank you, I thought this was the case but I wanted to be sure. Yes, that does make sense.

There is no expiry on the Asda ones and it was before xmas so I am sure it has been spent now. I bought her some Uggs too as she would never have bought them for herself. I asked her to try them on from a delivery I had and then said she could keep them. :rotfl:

Thanks Paddy, it would have been easy for me to pay her nothing as she refused to tell me what she had done and she refused to take any money when I was training her too. However, I have a young girl (my friends daughter) that works 'as and when' and I went on holidays for 3 weeks and they held the fort with my friend being 'in charge'. When I got back she came and helped me on the day after I got back and she said she would put everything in the post. I said not to worry I would do it and when I checked later to see if she had marked everything as dispatched, I found that she had not taken any money for the orders..... :eek: Although people pay on the site I take the money when the goods are picked and ready to be dispatched.

I mentioned this to my friend and she said 'oh yes, she was doing this all the time for me as well'. She she did not let her do anything without her being there - and my friend has children. So I bought the kids something special back from the states and then treated her because without it I'd be without the money and the stock. I knew she shopped in Asda so this was the easiest way. She got a 'wow' when she went to do her shopping that way.

Needless to say the young girl has not done any work since, I just tell her there is not enough work at the moment.

paulwf

If you are giving a gift card in lieu of wages and putting it through the business wouldn't that have income tax implications?

blue_monkey_2

She would not take any money. She has never been employed. There is no contract of employment as it was a one off. She would not pay income tax on that anyway - ti was minimal to the personal allowance and they get no benefits as her hubby works.

So it would be better (for who?) if I did not put it through the business? Makes no odds to me either way tbh, I just wanted to give her something as she refused a wage even though I said I would pay her x per hour. I am self employed if that makes a difference, I do not have any employees just the young girl who is casual 'as and when' she had a spare day and if I needed her.

paulwf

I hope you don't mind me raising the question - I can't give an answer as I'm not an accountancy expert but I thought I'd raise it in case HMRC wanted to look at the books.

Surely taking money out of the business in the form of gift cards (to reduce your taxable profits and to avoid income tax on the friends part) would raise a few eyebrows at HMRC?

If the friend refuses to do things by the book are HMRC going to accept informal payment arrangements? If so I'm going to draw money out of my business in tax free gift cards

How much was the gift card for? I doubt HMRC will bother with trivial gifts but larger amounts may get flagged up.

If it was me I'd be buying the gifts from my personal money not the business, but hope a more clued up forum member can help...

blue_monkey_2

It was a few hundred pounds and no, certainly not a problem in you asking. To be honest, I never gave it a second thought as it was not a huge amount and it affect neither of us for Income Tax.

I can certainly put it through as a 'wage' or I can just not bother and pay it out of my personal money as I was glad, for the first time, to be able to take a substantial holiday and not have to worry about the business (OK, that last bit was a lie and I was up every day on text on email - but after week 1 I chilled out a little and just thought 'what's the worse that can happen.....') but I myself do not have any taxable profits so I'd not be reducing my liability either.

Premier_2

blue_monkey wrote: »

... I just wanted to know if I could claim any VAT back on it or not. ...

Do you have a fully compliant vat receipt for the purchase?
If not, you cannot reclaim vat even if it was applied.
(Vatable items on an Asda receipt are depicted with the letter 'V' following the price. Non-vatable items have the letter 'D')

paulwf wrote: »

If you are giving a gift card in lieu of wages and putting it through the business wouldn't that have income tax implications?

Almost certainly. Needs to be declared as a some form of benefit in kind if paid by the business.
If not paid by the business, then it can't be reclaimed as a business expense, let alone any vat input tax (which as others say probably doesn't apply anyway)

paddyrg

The benefit could be recorded in a P11D I believe, but HMRC are not focussing on a one-off gift/job so much as regular engagement. If in doubt check with your accountant at the end of the year