Credit Card Fees

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Yazi
Yazi Registered Posts: 225 Dedicated contributor 🦉
Hi

A business has a credit card terminal for a small number of payments from customers each month.
Any idea on the legalities (and accounting procedures in sage) of passing on the transaction charge when payment is by credit or debit card?
If the invoice has been raised and customer phones with card details and a 'surcharge' charged, would another invoice have to be raised?

Also would the surcharge be zero rated?

Thanks

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  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    There's nothing wrong with doing this. I'd code it to a separate code in Sage for "card fees" and offhand I'm not sure on the VAT treatment. I think it would be exempt (not Z) but not sure.
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
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    There is no vat but you can't do it for debit cards. although i think some companies do but call it something like a handling fee whereas we just pass on part of the expense.

    not sure about the invoicing side, we work on pro forma and then if someone pays by credit card we detail it on their VAT invoice
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
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    on the invoice from the terminal people it splits the card charges and the terminal charges. no vat for card charges but there is standard rate on the machine cost
  • Yazi
    Yazi Registered Posts: 225 Dedicated contributor 🦉
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    Thanks for your answers.

    Primble - why cant you charge for the Debit Cards..?
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    You can charge for debit cards; EasyJet do. I believe there was something in the offing that was trying to stop them doing that, maybe that's what Primble is referring to?

    FYI, card processors charge about 20p to process a debit card transaction vs ~2% for credit cards, so the cost of processing debit cards is minimal compared to a credit card.
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
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    i think it depends what you call the charges, i think if its a card fee you cant but a handling or processing fee you can. hard to explain i'm not very good at explaining. basically i think there is something in the terms but it was all set up before i started
  • Yazi
    Yazi Registered Posts: 225 Dedicated contributor 🦉
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    Transaction Charges are 2.17% for Credit Cards
    and the same for Debit Cards...

    The only one that has a set charge are Visa Delta which is 60p or something per transaction.
    Apparently Delta are not being issued anymore.

    I guess that the best course would be to charge a processing fee then...
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
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    Double check the T&C before finalising anythinf
  • totleyblade
    totleyblade Registered Posts: 48 Regular contributor ⭐
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    VAT on Credit Card Fees

    I'd be tempted to charge VAT on the credit card fee because I think the Revenue would see this charge as an extension for the supply of goods or services at whatever rate those services are normally rated at.

    I suppose the banks don't charge VAT because they are supplying a financial service to you, you are probably not supplying a finacial service to your customer, it's really a handling charge.

    This is from the HMRC VAT guidance:

    ■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.

    I don't comment very often so I hope this is helpful.
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    Yazi wrote: »
    (Credit card) transaction Charges are... the same for Debit Cards...

    Really? I know credit cards have always attracted a percentage (interest) based charge but thought debit cards were a fixed fee, hence being better to pay with the latter than the former. Maybe something to do with being able to legitimately charge interest on money being lent to the consumer (payment by credit card) but not with charging interest on money that already belongs to the consumer (payment by debit card from their own bank account)?

    Cinemas and other similar ticket agencies have been adding booking fees to card payments for years, irrespective of which type of card was used. The sooner they scrap these the better...!
  • *Jo
    *Jo Registered Posts: 509 Epic contributor 🐘
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    As a customer I'm not happy to have any fee passed on to me as due to money laundering cash isn't widely accepted now and people frown at cheques.

    To be charged a fee for the privilige of settling my account the only way I can, is a bit wrong in my eyes.

    As a business I would agree with the other posters and say it would need VAT but have to admit its not my area of expertise.
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