Voucher vortex

My client Mr A is a restaurateur who has always issued £5 000 of vouchers to a wealthy business owner (Mr B) at Christmas.

In return Mr A receives a payment of £4 000 from Mr B who gives the vouchers away to 50 of his business contacts and friends who can then each enjoy £100 of free food and drink when they visit the restaurant.

Mr A has always accounted for VAT when the vouchers are redeemed by the business contacts based on the face value of the voucher less 20% (to reflect the 20% discount given to the business owner).

This has produced a VAT windfall for him because about half of the vouchers are never redeemed but he has still received payment for them.

However I understand that the VAT rules have now changed in relation to vouchers issued by...