VAT on CC charges?

robmar0se

Does anyone know what the VAT rules are for when a retailer makes a charge for using a CC?

I have had one case recently where the retailer (airline) didn't add VAT onto the CC charge, and another one (online retailer) who added 20% onto the 1.5% CC charge.

I'm no expert but as a financial transaction VAT should not be added to the CC charge?

Anyone know chapter and verse on this?

engineer_amy

From VAT notice 701/49


"4.7 Accounting for VAT on retail credit, debit and charge card sales
If you are a retailer:

• you must account for VAT at the time of supply (see VAT Notice 700: the VAT Guide) on the full price charged to the customer for the goods/services supplied, and
• if you charge for accepting payment by one of the above cards, the charge is further consideration for the supply of goods/services. VAT is chargeable at the same rate as the goods or services supplied"

https://www.gov.uk/government/publications/vat-notice-70149-finance/vat-notice-70149-finance


So it would appear that charging VAT on CC transaction fees at the same time as charging for the rest of the supply is correct.


Before reading that, my view was the same as yours, that bank charges (and by extension CC charges) were non-VATable

JasonLVC

Yes, credit charges are subject to vat.

The vat rate charged follows the main supply purchased. Flights are zero rated thus it would look like no vat is charged on the airline credit charge, whereas the online retailer sold something with 20% vat charged and so the credit cards charge will be plus 20% vat too.

This is why you get two different vat treatments on your credit card receipt.

chattychappy

Yes. A few years back, some retailers tried to avoid some VAT by processing CC transactions at, say, 95% of the retail price and then you would be charged 5% "finance charges" for CC acceptance which would be processed by an associated business. The upshot is you would pay the same price, but VAT would only be included in the 95% component rather than the whole lot. Places like M&S would have little stickers telling you about this at the point of sale and most people wouldn't notice.