VAT on Cash Machine Commission

[Zjc]

Hello

I am wondering if anyone can help. I run a convenience store and we have an external ATM machine which is provided by CardTronics. We fill the cash machine with our own cash and we are then paid commission on each transaction.

We have never been made aware that any VAT is due on the commission we receive until we had a routine visit from HMRC who determined that we have not been paying VAT on this commission. Our accountant and CardTronics have never heard of such a thing before and according to them we are exempt from paying VAT but HMRC are saying different.

CardTronics tell us none of their self fill customers have ever paid this VAT and they have never heard of this before.

Our accountant too has never heard of such a thing. We have tried to argue our case but HMRC are not backing down.

I am wondering if anyone can shed any light at all who may have any ideas on if we should be paying VAT on this commission or not?

Thanks

[R0b]

Hello

As a starting point, VAT is added to anything which is a taxable supply unless it is an exempt supply under Schedule 9 of the Value Added Tax Act 1994 (click here for link). The .Gov website indicates that commission is a taxable supply under the list of examples it gives on this link https://www.gov.uk/vat-businesses

That's just a really basic starting point but tax generally is really complex and I would suggest you start by asking your accountant why he/she believes it is an exempt supply. You could also ask the same to HMRC and get them to put in writing with a sufficiently detailed reason as to why they believe it is a taxable supply.

[Zjc]

Hi Rob

This is the response received from HMRC;

In your case, you, as the retailer, are not being paid by the customer of an ATM for a direct service of dealing with money. The convenience fee is paid direct to the LINK member, and it is therefore the LINK member that is providing the exempt financial service. It appears in this case that you are making a taxable supply to the ATM operator (stocking the machine with cash, supplying till rolls etc), for which you receive a fee based on a proportion of the convenience fee.

You have stated that you do not repair the machines and that this is done by an engineer. You further argue that the Association of Convenience Stores told you that ‘providing a receipt roll is not a service, it is still treated as a financial service as the details on it are financial being customers banking details and balances etc and it is part of the functions included within the ATM machine, it is not a separate service.’ Your agent further states that it is their view that the transactions fall under the VAT exemption in Group 5 of Schedule 9 of the VATA 94 – License to occupy land. The supply in question is that of the provision and upkeep of the cash point machine by the partnership. In this case, Officer XXX has established that the partners of your business are required to re-fill, monitor and deal with jams. It appears to me that the criteria for this section of the public notice is met and the supply is taxable. Regardless of whether the partners call in an engineer, they are still responsible, under agreement, to undertake minor repairs. I therefore uphold the decision that the supply is taxable in full.

But no-one else we know with the same agreement as us is paying this VAT.

[R0b]

It sounds like whoever upheld that decision from HMRC has done a cut and paste job on some of their response (their first paragraph). I suggest you look at the following HMRC link for further information which makes a reference to this 'convenience fee'. https://www.gov.uk/hmrc-internal-man...ual/vatfin2630

As I said above, tax law can be very difficult to understand so you might be best getting some proper tax law advice to consider whether or not you are liable. Maybe the ACS offers this as a member or maybe they have already received legal advice on this point which they might be willing to share with you.

I suppose it will depend on the contractual arrangement that you have with CardTronics and what services are being provided.

I've attached a copy of that Tribunal decision CDL v HMRC (and a summary too) but having read the CDL decision, they were not deemed to fall under the relevant exemption because they were not issuing cash or anything like that except for siting ATM machines whereas in your case you are the shopkeeper who does stock the cash and provide financial receipts so it would appear that you might fall under Group 5, item 1 of the exemption schedule. However, I would probably take the view that the maintenance and repair of the machine is a taxable supply.

Again, I think we come back to the point about what the contract stipulates the commission fee is for. If relates to the financial aspect, then I would think you are exempt from VAT but if it applies to the maintenance and repairs (which would seem odd) then that is a taxable supply, or if its both, then perhaps an apportionment.

I am not an expert in tax law so this is just my initial view and still recommend you seek proper advice on it.