-
CALL US 0203 883 4777
VAT on discounts and free gifts
VAT is chargeable on standard goods and services when these are offered by a registered VAT business.
The standard rate of VAT is 20% however there are different VAT rates and exemptions that available. In the UK, there are three different VAT rates, the standard rate @ 20%, the reduced rate @ 5% and the zero rate @ 0%.
The VAT rules are even complex in various circumstances for example when there are discounts or free gifts which are quite normal these days.
Have a look at our VAT Services.
https://www.gov.uk/vat-businesses/discounts-and-free-gifts
We have summarised the main aspects of VAT treatment in various situations:
Discounts and free gifts
| Situation | VAT treatment |
| 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 paid, 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 |
If you are looking to know about VAT, feel free to contact us.
Recent Posts
HMRC Steps Up Pressure on VAT Reverse Charge in the Construction Industry
HM Revenue & Customs is increasing scrutiny of VAT practices across the UK construction sector as part of a wider...
Public EV Charging VAT Rate in the UK: Tribunal Says 5% Should Apply
A UK tax tribunal has ruled that operators of community electric-vehicle (EV) charge points may apply the 5% reduced VAT...
Zero-Rated VAT for Books in the UK: Tribunal Backs Publisher in Ghost-Written Book Dispute
A recent UK tax tribunal decision in Story Terrace Limited v HMRC [2025] UKFTT 01554 (TC) has clarified how VAT...
Study Calls for Tax Evasion as Corruption to Be Recognised in Crackdown on Financial Crime
Researchers examining global financial crime enforcement argue that recognising tax evasion as corruption could help governments hold financial criminals more...
Are Small UK Businesses Holding Back Growth To Stay Under The £90,000 VAT Threshold?
Fresh HMRC figures have reignited an old VAT debate: whether the UK’s compulsory VAT registration threshold is creating a “cliff...
UKDI Fast-Paced Innovation Competition Enters New Phase with Fresh Defence Funding
The UKDI fast-paced innovation competition has entered a new phase after the UK Ministry of Defence’s innovation unit, UK Defence...
VAT on UK Private School Fees Survives Latest Legal Challenge
The Court of Appeal has rejected the latest legal challenge to adding VAT on UK private school fees, confirming that...
A Practical Guide to MTD for ITSA for Sole Traders and Landlords
Many sole traders and landlords are used to dealing with their tax once a year. Records are often pulled together...
How Do Employee Share Schemes Work? A Practical Guide for UK Businesses
Attracting and retaining skilled employees has become more challenging for UK businesses, particularly for growing companies that need to manage...
Independent Schools Leaving the Teachers’ Pension Scheme: What It Means, Why It’s Happening, and What Schools Can Do Next
A growing number of independent schools have chosen to leave the Teachers’ Pension Scheme (TPS). Recent reporting, based on a...