Those using GoCardless will soon start to see VAT applied on their charges.

From 1st September 2020 GoCardless will start to charge VAT on all their fees that they charge for services.

The change has come after HMRC updated their guidance in April, stating that the fees GoCardless charge will no longer fall within the scope of VAT exemption.

Although the change was made in April, GoCardless are absorbing the VAT costs for any of their existing customers until September because of the impact of Covid-19.

VAT will be charged at the UK Standard Rate, which is currently 20%.

Impact for VAT Registered Businesses

If you are VAT registered, GoCardless need you to provide them with your VAT number. The changes will have minimal impact to you, as you will be able to reclaim the added VAT cost in your VAT returns.

The VAT that you can claim will include the period from when the change came into effect, which means that you can claim from 14th April to 31st August, as well as the periods following 1st September when the charges come into full effect.

Impact for Exempt Goods/Services or Non-Registered Businesses

If you are not VAT registered, or supply goods/services which are VAT exempt, you will not be able to reclaim the VAT costs from the GoCardless fee.

Because of the impact this could have on businesses which have already been affected by Covid-19, GoCardless are setting up a VAT relief fund which will help to offset the impact of these changes.

This relief fund is something that you need to apply for if you wish to take advantage of it. Please click here to go to the GoCardless website and find out more about applying for this relief fund.

If you are defined as a Micro-Enterprise in your agreement with GoCardless, you can terminate this agreement immediately without any charges.

Alternatively, if you continue to use GoCardless after 15th August 2020, this will be counted as acceptance of the changes.