If you’re running a VAT registered business (turnover of over £85,000), you have to pay VAT on most purchases of goods and services in the UK. The standard VAT rate is 20%. And, a reduced rate and/or zero rate VAT is payable on some. In addition, some goods and services are exempted from it. So, as a whole, we can say that VAT is chargeable on most of the transactions you perform. However, there are quite a few transitions on which you thought VAT was charged but in reality, it wasn’t. These days even some financial institutions are charging VAT on financial services you get. But are bank charges VATable? Can you claim back VAT on them? Let’s delve into the details in this short blog to find out the answers.
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Are Bank Charges VATable?
Dealing with the VAT charges of financial institutions can be complex, especially when you’re an employer. In this instance, you need to know whether you need to pay VAT on bank charges or not:
VAT laws are not the same around the world, they differ from country to country. However, many countries don’t charge VAT for transferring money from one bank to another. Other than VAT, you might have to pay certain fees charged by the bank, not by the government.
Fortunately, you don’t need to pay VAT on bank charges in the UK.
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Do you Need to Include Bank Charges in your VAT Return?
As you know that you need to submit VAT returns to declare your taxes. But do you need to include/declare your bank charges on the VAT return? Let have a look:
In most cases, bank charges are exempted from your VAT return. It is obvious that if you’re not paying VAT on bank charges, you don’t need to include it in your VAT returns. However, you might need to include them if the bank charges are related to the issuance of any financial certificates (for example, audit and balance certificates supplied to third parties) or the cost incurred on special printing or overprinting of cheques books and paying-in books.
Bear in mind that you need to pay a small fee for transferring money, especially for international transfers. However, this fee is charged by the bank. Therefore, you don’t need to report it in your return.
Quick Sum Up
Hopefully, you have got the answer to are bank charges VATable in the UK. The straight answer to this question is no, you don’t need to pay VAT on bank charges. And you are exempted to include them while filling in your VAT return except for the issuance of certain types of financial certificates or the cost incurred on special printing or overprinting. So, we hope that you have got a basic knowledge concerning VAT on bank charges.
Concerns regarding VAT on bank charges can be tricky. For this reason, you should consult our VAT accountants for help, reach out to us today!
Disclaimer: This post is intended to provide basic information on is VAT payable on the bank charges.
