Gift vouchers sold at Christmas — when do I recognise the income and account for VAT?

Your instinct is right: selling a voucher is not the same as making a sale. When a customer pays in December, you have taken money for food and drink you have not yet supplied, so in the accounts that amount should sit as deferred income, or a voucher liability, until redemption. A voucher sold in December and redeemed in January belongs to January's income, not December's, and the unredeemed balance at your year end should be shown as a liability, not as profit.

VAT follows the distinction between single-purpose and multi-purpose vouchers. A single-purpose voucher is one where, at the time it is issued, you already know the place of supply and the VAT rate that will apply, for example a voucher for one specific standard-rated item. For that type, VAT is generally due when the voucher is sold. A multi-purpose voucher, by contrast, can be used for a range of goods or services whose VAT treatment is not yet known, so VAT is generally due when it is redeemed, based on what is bought.

That distinction matters for a café, because your menu is likely to include both standard-rated and zero-rated items, depending on whether food and drink are hot, cold, eaten in or taken away. If a voucher can be spent on either, you will often be dealing with a multi-purpose voucher, even though it can only be used in your café. You should not apply one flat VAT treatment to every voucher without checking what it can be redeemed for.

For your Christmas offer, the key point is the amount paid, not just the face value. If you sell a £50 voucher for £40, the consideration for VAT and income purposes starts from the £40 paid, and any VAT at redemption is worked out on the goods supplied against that consideration, with the discount reflected in the till and voucher records. Keep a register showing each voucher sold, its value and amount paid, its redemption date and amount, and its expiry date.

On expiry, do not write off the balance casually. Only recognise unredeemed amounts as income when the voucher has expired under clear terms, or when you have a reliable pattern showing that a proportion will not be redeemed, and keep that estimate under review. Clear terms and regular reconciliation will prevent the year-end voucher balance from becoming a guess.