VAT: On-line payment handling fees

Structuring payment handling fees VAT-efficiently

Case Study

An on-line retailer would like to consider a proposal such that part of its VATable fee, service charge or commission can be structured in a manner that the payment handling element can benefit from VAT-exempt status if possible to reduce the cost of the overall product to the end user.

The following issues arise:

  • Examining all the sources of  revenues split between profits on sale of goods, fees, commissions and service charges.
  • Ascertaining the fundamental VAT rules regarding payment handling charges.
  • Application of both VAT rules and VAT case law to client’s specific circumstances and proposals.
  • Examining client’s corporate structure and advising how a separate payments handling company can be integrated within this structure.
  • Examination of any direct taxation consequences as a result of the changes.
  • Other relevant tax and legal issues.
  • Issue of whether any regulatory licences are required to hold customer monies.

RKG Consulting will be pleased to advise from the start to the conclusion of a project to structure payment handling fees tax-efficiently for an online retailer.