Until April of this year, GoCardless have been exempt of charging VAT on fees, but following on from the government’s announcement in April of this year, that VAT will need to be charged on all fees for supplies, it meant that GoCardless were required to charge VAT on all of their fees.
Due to the COVID-19 pandemic GoCardless made the decision to cover these charges until 1st September to help businesses through these unprecedented times, by covering the charges themselves.
Now that this deadline has passed, all businesses that accept GoCardless as a method of payment will now need to pay VAT on all existing fees. There is no VAT charged on the full transaction amount, it’s just the fee which you pay to accept the payment. For example if the total transaction is £200, the GoCardless fee will be £2.20 + VAT at 20% – £0.44 so the total fee amount will be £2.64.
Regardless of whether or not your goods or services are exempt from VAT, GoCardless are still required to apply VAT to your fees. If your business is not VAT registered or is exempt from paying VAT you will not be able to recuperate costs of VAT.
GoCardless put a VAT relief fund in place to help existing customers. They could qualify for this if charging VAT significantly impacted their business. They would then consider options in order to ease the impact. This was based on your business being below the VAT threshold between 15 June and 1st August 2020 and you signed your contract with GoCardless before 1st June 2020. They then asked businesses to provide them with evidence to support their VAT exemption, through filling in an online form. They will then determine whether that particular business was seriously impacted by the VAT charges in order to make a decision. The deadline for applying for VAT relief was back in August, so going forward all businesses using GoCardless will be charged VAT on all fees.
Fees include transaction fees, monthly or annual subscriptions, fees for failures, chargebacks, refunds or high value transactions, add on fees for plus or pro packages and any accounting servicing fees. VAT will be calculated on capped amounts.
For further information visit https://gocardless.com/legal/vat-faqs
Did you know that Sage 50cloud Accounts can integrate with GoCardless?
Currently BACS and Faster Payment Services are the main method for paying suppliers although UK Finance estimates that Direct Debits for consumer payments will grow 50% by 2025. Businesses who collect payments by Direct Debit are already ahead of this curve. If customers are using the GoCardless platform for these payments, they can now use integration with this GoCardless and their Sage 50c Accounts software.
If you’d like help with setting up or using Sage 50cloud Accounts, feel free to contact us.