VAT on rewards for crowdfunding

As an entrepreneur you may look to a crowdfunding site to raise money for a new product. Prospective investors are asked to commit to a set level of funding; in return they earn a package of rewards which expands with the level of funding. The VAT implications, however, can vary considerably. 

 

HMRC treat the promise of rewards as a voucher for VAT purposes or sometimes as a pre-payment for goods or services. If the reward consists of one product, the treatment is simple: VAT is due when the investors hand over their money. However, when the reward package includes a number of items or services which carry different VAT rates (a ‘multi-purpose voucher’), VAT is due when rewards are received. 

The difference in VAT taxpoints (the relevant date) between a single product reward and a multi-purpose reward voucher can be a considerable time period. If your business has not already registered for VAT when it starts to receive money through crowdfunding, the package of rewards can determine when you must register and account for VAT. 

 

Please do let us know if you have any questions or if you need any further help understanding the guidance – please call us on 01932 564098 or message us here. 

 

This note was published from our Spring 2018 Newsletter dated March 2018. 

 

Please be aware that the information above may have changed in subsequent months. 

 

This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.