Jargon Busting - Does your SPV issue SPVs?

Continung this series of Jargon Busting explanations, we turn to SPV which has been used for many years in the business world and also by HMRC VAT.

SPV – According to business

This means Single Purpose Vehicle. What is this?

All this really means is a limited company. It usually means a new company set up for a specific task or an asset, often property, within an existing group. The idea being that if it fails, it's debts don't become debts of the group's other companies, or if it succeeds it can be easily sold off without having to disentangle its activities from other group business.

Therefore SPV is a term you often hear, but not to be confused with the completely different VAT version...

SPV – According to HMRC VAT

This means Single Purpose Voucher. What is this?

The definition was changed in 2019 to bring forward when VAT is due on most vouchers, usually gift vouchers. If you sell a gift voucher which can be exchanged for goods or services charged at the same VAT rate, the VAT is due at the date of sale of the gift voucher.

If, however, the goods or services aren't charged at the same VAT rate the gift voucher is called a Multi-Purpose Voucher and VAT is only due when the voucher is later exchanged for goods or services.

You may therefore prefer to issue Multi-Purpose Vouchers not only to delay VAT, but sometimes not to pay any. This is because many vouchers are never redeemed, and if they are MPVs, you don't need to account for VAT on any part of the money received for that MPV.