Common System of VAT (Vouchers)

Rob Marris Excerpts

Monday 2nd November 2015 General Committees

[The Chair]

With the Minister having explained the matter so clearly, we have an hour for questions. I remind Members that they should be brief and, crucially, include a question. At my discretion, they can ask supplementaries, if they wish.

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gray. In past years, you and I have spent many years working constructively, I think, together in this room.

The area is particularly complex. I hope the Minister will confirm whether I have understood the proposal correctly—it is quite possible that I have not—but when we boil it down, it is that single-purpose vouchers would be subject to VAT when they are issued and multi-purpose vouchers would be subject to VAT when they are redeemed. That is what I pick up from the papers. Incidentally, the papers are one of the few places outside church where one hears the word “redeemer” used.

[Mr Gauke]

Yes. The hon. Gentleman has essentially summarised the matter very effectively, so I am happy to confirm that.

[Rob Marris]

I understand that the Commission considered four options. One, perhaps unusually for the Commission, was to do nothing. One was what it is pleased to call—I confess that this is a new one on me—the “soft law” approach, which most people would call guidelines. Another was to legislate, and the fourth option was a ban. Which of those four—to do nothing, the guidelines, to legislate or a ban—was the preferred option of Her Majesty’s Government?

[Mr Gauke]

The first of the UK Government’s objectives was to address a level of inconsistency and confusion that exists under the status quo, so we were not in favour of the do-nothing approach. Equally, we see vouchers as having a role to play. Within the UK, we have one of the bigger markets, as one might expect—although it is perhaps bigger than one would expect based on the proportion of our economy. We would not therefore favour banning vouchers; that would be a very draconian approach.

To get the type of clarity that we think we need, we concluded that guidelines would not be sufficiently strong. Therefore, of the four options, we favour legislating and hope that we can reach agreement among all member states so that the Commission’s proposals can go forward in a legislative form, although, as I said, we have highlighted a couple of areas where we think they can be improved on.

--- Later in debate ---

[The Chair]

Mr Marris, do you have a further question?

[Rob Marris]

I have two further questions, if I may. As the Minister is aware, article 30a—I think it is a draft—defines “voucher”. It defines “single-purpose vouchers”, “multi-purpose vouchers” and “discount vouchers”. Are Her Majesty’s Government satisfied with those definitions?

[Mr Gauke]

In essence, we are satisfied with the definitions set out in article 30a. Ultimately, this is not about discount vouchers such as money-off coupons, so I hope that those are not at the heart of the proposals before us. We are satisfied with the definitions.

[Rob Marris]

As the Minister said, this is a matter of considerable complexity. Were the proposals to go ahead—with, as the Minister mentioned, some fine tuning—would complexity for business increase or decrease? Which is the likely assessment?

[Mr Gauke]

It would be fair to say that there is some complexity in the current system because of inconsistency. The hon. Gentleman asks whether the draft directive will disrupt businesses because they will have to deal with a new regime. I would argue that it will not cause major disruption to businesses here. The most likely to be affected would be large, high street chains. High street shops that issue vouchers through distributors to other businesses would be most affected. Those that issue vouchers direct to their customers would be least affected.

Whether a business will be affected significantly will depend on the balance between the two types of operation within the same business. Some high street retailers issue both types of voucher. Some distributors might want to change their business model from buying or selling vouchers to arranging the sale of vouchers. That is quite possible.

Officials have had wide-ranging discussions with UK businesses on the changes. Although there may be some changes and disruption, the general feedback that officials have received from businesses is that they would welcome certainty on the matter in the future. Again, I make the point that, for the first time, VAT law would have a specific provision for VAT treatment of vouchers, which would mean that EU member states would have the same rules, making cross-border trading using vouchers far easier. Businesses would no longer have to set up different systems for different countries.

To give a topical example, the provisions would also make the collection of VAT on mobile phone roaming charges far simpler. The new rules would allow the UK to make changes to our law to make it easier to collect the right amount of tax on what the customer pays when using a voucher. Yes, there will be some disruption to and impact on high street retailers but, on balance, if an agreement can be reached, this is a favourable change.