Are bank charges VATable?
Tips / 25.09.2019
VAT may be necessary, but few of us enjoy being surprised by a charge we thought was included in the price of something but wasn’t. Some institutions have even taken to charging VAT on financial services, depending on what they offer.
But what about bank charges? Can you reclaim VAT on them and what would be the appropriate accounting code for that?
Let’s dive right in.
Are bank-issued fees VATable?
Dealing with such charges can be tricky, especially if you’re an employer. That being said, here’s what you should know about whether bank charges are VATable or not:
VAT laws differ between countries, but the majority will not charge VAT for bank transfers. Certain other fees may be incurred, but they come from the bank, not the government. In the United Kingdom, there is no VAT on bank charges.
Card machines to help your business grow!
Accept debit and credit cards through your traditional or smart card payment machine and enjoy instant settlement of funds.
Should bank charges be covered on your VAT return after all?
In the UK, some people are required to file VAT returns when declaring their taxes. But should one declare their bank transfer charges on their VAT return:
In general, bank charges are exempt from one’s VAT return, except when they’re related to the issuing of some financial certificates or the cost of special overprinting. Since the charges are meant to be included, the proper code for that would be “T2”, which responds to being exempt.
Please remember that you’re almost guaranteed to have a small transfer fee, especially for international transfers, but that fee is issued internally by the bank and doesn’t need to be reported on your return.
VAT can be complicated and hard to understand, but luckily for the average consumer, most products and services we pay for have their VAT included in the price. Fortunately, myPOS transfers are explicitly exempt from this law as well as other bank transfers in most places, so it’s not something you need to worry about!