LAST minute Christmas shoppers are being urged to understand the potential risks of giving store vouchers as presents.

R3, the trade body for restructuring and insolvency professionals, has warned the vouchers may be worthless if a retailer goes out of business or enters an insolvency process.

Garry Lee, chair of R3’s southern and Thames Valley region, and an assocaite director in Evelyn Partners’ Southampton office, said: “Gift cards are highly convenient and can be easily bought both in stores and online.

“However, it is vital that consumers understand how they can be affected if the retailer that offers them enters an insolvency process.

"Customers with gift cards or vouchers from any retailer which enters an insolvency procedure and is either continuing to trade, or has gone through a pre-pack administration, must check with store staff whether they can still redeem them.

“If this is possible, it’s generally a good idea to spend them sooner rather than later, especially as your local store may be earmarked for closure or the situation across the whole organisation may change quickly, if the firm becomes insolvent.”

Vouchers and loyalty cards for the video game store Game Group were suspended when it went into administration a decade ago, although a new owner reinstated them.

When HMV first went into administration in 2013, the administrators initially refused to accept vouchers, although the decision was reversed following an outcry. The stores continued accepting vouchers during a second spell in administration at the end of 2018.

Holders of Debenhams vouchers were able to spend them for a while when the chain went into administration in 2020, but the vouchers were not accepted when online giant Boohoo bought the brand name. 

Locally, 185 gift vouchers totalling £13,622 became worthless when the Poole restaurant Isabel’s was liquidated following its closure in 2021.

Corporate insolvencies in England and Wales rose 21 per cent between November 2021 and November 2022, to 2,029.

Mr Lee added: “It is understandably frustrating when a retailer won’t accept gift cards during an insolvency process.

“However, the insolvency practitioners in charge of the process are obliged to look after all creditors’ interests according to a strict hierarchy set out in law, and unfortunately customers are just one of many affected creditors.

“Insolvency practitioners overseeing a retail insolvency have to make their decisions regarding accepting gift cards on a commercial basis and it is not a decision that they will take lightly.

“On the one hand, accepting them could lose the business more money, but on the other, not doing so could hurt the relationship between the retailer and its customers.”

Financial pressures on retailers can be increased by rental payments due around December 25, one of four “quarter days” each year.