Quick yes/no question re VAT

[janearmstrong1987]

Can someone please tell me if I have to charge VAT on a credit card surcharge (i.e. if customer choosing to pay invoice amount by credit card, we charge 2% surcharge) I think this is exempt according to VAT 701/49 but not entirely sure?
Thanks
Jane

 

[Scalloway]

From my reading of that notice you only charge VAT if the charge is made at the time of sale so I would think a charge for accepting a credit card when paying an invoice would be exempt.

 

[janearmstrong1987]

From my reading of that notice you only charge VAT if the charge is made at the time of sale so I would think a charge for accepting a credit card when paying an invoice would be exempt.

Thank you so much! That is what I thought but I think those notices have a way of - in trying to be simple - being very confusing!!

 

[Searching for Perfection]

Can someone please tell me if I have to charge VAT on a credit card surcharge (i.e. if customer choosing to pay invoice amount by credit card, we charge 2% surcharge) I think this is exempt according to VAT 701/49 but not entirely sure?
Thanks
Jane

NO you must not charge VAT on Surcharge because it is not a value addition from you....

 

[Mitchells Bristol]

I disagree with the postings above - the credit card surcharge will be treated as an extension of the service provided. So assuming the service is standard rated, the credit card charge will also be standard rated for VAT purposes.

 

[faradaykeynes]

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 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

http://customs.hmrc.gov.uk/channels...rtyType=document&id=HMCE_CL_000111#P203_25931

 

[Searching for Perfection]

I disagree with the postings above - the credit card surcharge will be treated as an extension of the service provided. So assuming the service is standard rated, the credit card charge will also be standard rated for VAT purposes.

Credit card companies charged VAT on monthly basis for their services rendered and not on each and every transaction... so how can you charge VAT on something for which you haven't paid VAT... VAT is chargeable at the same rate as the goods or services supplied

 

[UK Contractor Accountant]

You are of the assumption that VAT is logical! It is not, sometimes a supply is exempt if made on it own and sometimes subject to 20% if made alongside a taxable supply.

 

[Mitchells Bristol]

how can you charge VAT on something for which you haven't paid VAT

Just add 20% onto it, in accordance with the VAT rules as quotes by Faradaykeynes

 

[Raw Rob]

so how can you charge VAT on something for which you haven't paid VAT...

Sometimes this is how it works. One simple example, if you buy a stamp from a Post Office, it will not have VAT on it. If you then use that stamp to post a VATable item to a customer, you would have to charge VAT on the postage.

VAT is chargeable at the same rate as the goods or services supplied

Not always true, the example above, plus if you buy from a business which is not VAT registered, if you are VAT registered you still have to charge VAT if it is a VATable item.

 

[Anna Chandley]

[quote="faradaykeynes, post: 2427824, member: 140023"

• 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
• [/quote]

The reference to the goods or services supplied in this quote means the goods and services that you supply not the goods and services that have been supplied to you.

Ie you supply a standard rated goods then the surcharge will be standard rated

 

[accountsandlegal]

But that is for the service you provide in supplying it, e.g. in restaurants the percentage added to the price of the food is called the 'service charge'. NB incredible how many contributors felt able to pass comment on VAT 701/49 without actually reading it.

I have a question about interchange charges banks charge on processing card transactions. Does anyone think they have been rising? This could become an issue now, as 53% of the number of purchases made in 2013 were by credit or debit card.

 

[The Byre]

how can you charge VAT on something for which you haven't paid VAT?

For the same reason that you must charge VAT on anything that is bundled into the one transaction and that transaction is liable for VAT.

The alternative is to bill the surcharge separately and as a separate transaction.