What is a face value voucher?

The Scottish Court of Session (equivalent to the English Court of Appeal) has delivered a significant judgement in the case of Find My Past which seems to significantly move the goalposts on when a supply takes place in cases where payment is required up front.

In this case FMP customers purchased credits which could be used to download information from the FMP website. The Court held that no tax was due, unless and until the service was delivered, even though customers had to prepay. This gave the appellant the benefit both of a cash flow advantage and an absolute saving in the event that the credits were not used. Even though the Court did not consider that FMP was issuing Face Value Vouchers, the effect of the decision was to give the benefit of voucher treatment.

In Macdonald Resorts the ECJ had held that no tax point could arise where there was uncertainty as to the VAT liability of the service ultimately to be delivered, but this decision appears to extend this concept to cover uncertainty as to whether a service will be delivered at all.

This decision has potentially significant knock on effects for all businesses which payment upfront for services which may or may not be utilised by the customer.