Accounting for Gift Vouchers in UK Travel and Hospitality | Antravia UK

Accounting for Gift Vouchers in the UK Travel and Hospitality Industry

Gift vouchers look simple on the surface, a quick sale, a printed code, an easy win for cash flow, but their accounting treatment is not as straightforward as most think. Whether you’re a travel agent giving customers £100 off a holiday, or a hotel selling £200 spa vouchers, how you record, report, and disclose those vouchers matters for both your VAT and your financial statements.

In this guide, we’ll look at two common cases: vouchers sold for cash (like hotel or spa vouchers) and vouchers given away as a promotion or discount (often by travel agents). Both require care to stay compliant with HMRC and FRS 102.

1. When Vouchers are sold for cash - Hotels, Spas, and Experiences

These are what HMRC calls gift vouchers, where a customer pays money upfront to receive a code or card that can later be exchanged for goods or services.

a. Single-purpose vs multi-purpose vouchers

Under HMRC VAT Notice 700/7, vouchers are divided into two types:

• Single-purpose voucher (SPV): You know both what will be supplied and the VAT rate when it’s sold.
  Example: a £200 hotel spa voucher redeemable only for treatments subject to 20 % VAT.

• Multi-purpose voucher (MPV): You don’t know what VAT rate applies at sale — it might be used for rooms, meals, or zero-rated items.

This distinction drives when VAT becomes chargeable, not how you recognise the revenue.

b. Accounting entries for single-purpose vouchers

For an SPV, VAT is due immediately when the voucher is sold, even though the customer hasn’t yet received the service.
Accounting under FRS 102 still treats the unredeemed portion as deferred income.

At sale (£200 voucher):

• Dr Bank £200

• Cr VAT Output £33.33

• Cr Gift Voucher Liability £166.67

At redemption:

• Dr Gift Voucher Liability £166.67

• Cr Revenue £166.67

VAT was already recognised at sale, so no further VAT is posted on redemption.

c. Accounting entries for multi-purpose vouchers

For an MPV, VAT is not due until redemption.
At sale, the full amount remains a liability; VAT is only calculated when the voucher is used.

At sale (£200 voucher):

• Dr Bank £200

• Cr Gift Voucher Liability £200

At redemption (for a 20 % VAT service):

• Dr Gift Voucher Liability £200

• Cr Revenue £166.67

• Cr VAT Output £33.33

Hotels should ensure their PMS or POS software records both the liability and redemption correctly, otherwise, vouchers can sit unrecognised on the balance sheet long after expiry, distorting revenue figures.

d. Breakage (unused vouchers)

If a voucher expires unredeemed and there is no legal obligation to refund, FRS 102 allows the remaining liability to be recognised as income.
You should have clear written terms defining expiry and refund policy, as HMRC may challenge breakage revenue if customers could still claim redemption.

2. When Vouchers are given away - Travel Agent Discounts and Promotions

Promotional vouchers, such as “£100 off your next holiday,” are not gift vouchers in the accounting sense because no money changes hands. They are marketing discounts, not deferred revenue.

a. Accounting treatment

When a travel agent issues a £100 discount voucher, there is no entry at the time of issue, it’s only recognised when redeemed.

At redemption:
If a customer books a £2,000 holiday and uses the £100 voucher, revenue is recorded net of the discount:

• Dr Bank £1,900

• Dr Discount Expense (marketing cost) £100

• Cr Sales Revenue £2,000

The £100 acts as a reduction in revenue or as a marketing cost depending on how your accounts are structured. For presentation, most travel agents show the discount as a marketing expense rather than deducting it from sales to keep turnover consistent for VAT and ATOL reporting.

b. VAT treatment

Because the voucher is promotional and no separate payment is received, no VAT arises when the voucher is issued.
VAT is charged on the net amount actually paid by the customer when the sale occurs.

c. Impact on financial statements

FRS 102 Section 23 treats these as variable consideration or sales incentives.
They should be recognised in the same period as the associated sale, not as liabilities.
The only liability would arise if you promised a cash-redeemable offer, which would be rare in travel.

3. What to Disclose in the Accounts

Companies should review at year-end:

• The balance of unredeemed vouchers (liability).

• The value of expired vouchers recognised as income (breakage).

• Any significant promotional discounts applied during the period (as marketing cost).

These should be disclosed either in revenue accounting policies or notes on deferred income.

4. Why does this matter?

For hotels, spa operators, and travel agents, vouchers can distort cash flow and reported revenue if not handled correctly. Recording the sale as income too early inflates profits and understates liabilities. Conversely, failing to release expired vouchers leaves income understated.

Auditors and HMRC both focus on voucher accounting because it links to VAT timing, deferred income, and the completeness of reported revenue.
Handled properly, voucher sales can boost liquidity without creating compliance risk, but it depends on accurate classification and documentation.

References

1. HMRC. VAT Notice 700/7: Business promotions and VAT. https://www.gov.uk/guidance/business-promotions-and-vat-notice-7007

2. FRC. FRS 102 Section 23 – Revenue.

3. Companies Act 2006 – Accounting records and true and fair view requirements.

Disclaimer

This article is provided for general information purposes only and does not constitute accounting, tax, or legal advice. Regulations, tax rules, and reporting requirements may change, and their application can vary depending on your business structure and circumstances. Readers should seek professional guidance from a qualified accountant or adviser before making any financial, tax, or compliance decisions. Antravia UK accepts no responsibility for any loss arising from reliance on the information contained herein.