It makes no difference that these are discounted vouchers, in other words that they are purchased at a discount to their face value. Note, they are not discount coupons or money-off coupons. Specifically, according to the HMRC note, the vouchers in question are called 'face value vouchers' of a specific type called 'credit vouchers'. Read on for why I say this.
You quoted Section 7 of note 700/7 which refers to 'Coupons' but this is the wrong section. The vouchers that Ryan has been handling do not fit the definition used in Section 7.1. Although the vouchers are being purchased by Ryan (or by his clients) at a discounted price, they are nonetheless not "coupons issued to the public offering a reduction in the price of a future purchase" (see Section 7.1).
Instead Ryan's vouchers fit the definition provided in Section 8.1, "Face value vouchers are vouchers, tokens or stamps with a cash value stated on them or recorded, for example electronically, within them. They are normally supplied for a consideration" and Section 8.4, "Credit vouchers are face value vouchers that are issued by a person who cannot themselves redeem them for goods or services. Instead the issuer undertakes to give complete, or partial, reimbursement to whoever does redeem the voucher". Ryan's vouchers fit both these Section 8 definitions.
In these terms, the vouchers that Ryan has been handling do in fact have similar VAT treatment as computer hardware in my example ("The issue of a face value voucher is a supply of services for VAT purposes", Section 8.2).
To my mind, therefore, the only aspect that possibly makes a practical difference is that, as you say, Ryan is the only legitimate buyer of these vouchers (which is not a VAT issue) since only he can legitimately buy them through his employment. It might therefore be argued that this prevents him merely being someone's agent or advisor in the purchase of the vouchers and that he must therefore be reselling the vouchers. This leads on to a concomitant VAT issue of course, since reselling the vouchers would take him over the VAT threshold.
(Not that, it should be noted, being VAT registered would not necessarily prevent this overall scheme from going ahead. If Ryan was reselling the vouchers for what he bought them for then his situation would be VAT neutral with respect to the vouchers. He would of course have to charge VAT on his separate service fee, though).
I think you are basing these comments on Section 7 but, as above, that seems to be the wrong Section.
(a) The purchaser, whoever that is, does pay the VAT. (This is true currently and also in any putative proposed scheme).
(b) It doesn't matter that the vouchers are discounted in the applicable context (Section 8, not Section 7).
(c) The seller only needs to account for VAT on the vouchers if they are VAT registered (and, of course, if they are in fact actually buying or reselling the vouchers themselves).
According to the HMRC notice (Section 8) it makes no difference in the context under discussion (i.e. whether or not Ryan needs to be VAT registered).
Note however, that according to the notice (Section 8.4, second and third paragraphs), if it can be shown that the vouchers were originally sold by the issuer at a discount to their face value then the redeemer (that is the retailer accepting the vouchers) can charge VAT on the discounted amount. This is in fact how the vouchers are currently being sold to Ryan. However, the redeemer is presently not charging VAT on the discounted amount according to Ryan's example figures above and, even if Ryan was VAT registered and was reselling the vouchers, it would still not be his problem in this context since he would still not be the redeemer.
As I mentioned above, being VAT registered and keeping VAT records would be an annoyance but does not actually necessarily prevent this scheme from going ahead in some form. As I mentioned previously, Ryan would still have to account for any service fee income and costs for income tax purposes anyway.
Anyway, I still say that none of this discussion matters here. Our differing interpretations of the HMRC note show how complicated it is. Ryan should still get professional advice and not rely on anything said here.
Last edited by markrlondon; 12th December 2016 at 02:20. Reason: Fixed missing "not"