Payment Processors and VAT
Discussion
Heres an interesting question for you all.
If you have a business that is processing payments for other businesses, how is this defined when it comes to the VAT office?
If you take someone like Worldpay, they pass the money they collect back to you on a regular basis, minus their charges. Their charges are VATable, and so, they take their charges plus the vat on their charges.
If you are not following me, essentially, they process £100 for you. Their fee is maybe £3. Vat of £3 is 52p, so the amount they remit is £97.48.
But - how do they define their relationship to the VAT office that they are a payments processor, and not the seller? Or have I missed something really obvious?
If you have a business that is processing payments for other businesses, how is this defined when it comes to the VAT office?
If you take someone like Worldpay, they pass the money they collect back to you on a regular basis, minus their charges. Their charges are VATable, and so, they take their charges plus the vat on their charges.
If you are not following me, essentially, they process £100 for you. Their fee is maybe £3. Vat of £3 is 52p, so the amount they remit is £97.48.
But - how do they define their relationship to the VAT office that they are a payments processor, and not the seller? Or have I missed something really obvious?
I had a VAT inspection a while back and this came up. Worldpay are not responsible for the VAT on the sale, you are.
So you take £117.50 in payment via Worldpay. You are responsible for the VAT of £17.50 and then Worldpay give you an invoice for processing the payment. The VAT element of the payment being processed does not concern Worldpay.
Be careful with the timing too. I had to change my procedures to account for the VAT at the time of sale, even though Worldpay don't give me the money until two weeks later.
So you take £117.50 in payment via Worldpay. You are responsible for the VAT of £17.50 and then Worldpay give you an invoice for processing the payment. The VAT element of the payment being processed does not concern Worldpay.
Be careful with the timing too. I had to change my procedures to account for the VAT at the time of sale, even though Worldpay don't give me the money until two weeks later.
PetrolTed said:
I had a VAT inspection a while back and this came up. Worldpay are not responsible for the VAT on the sale, you are.
So you take £117.50 in payment via Worldpay. You are responsible for the VAT of £17.50 and then Worldpay give you an invoice for processing the payment. The VAT element of the payment being processed does not concern Worldpay.
Be careful with the timing too. I had to change my procedures to account for the VAT at the time of sale, even though Worldpay don't give me the money until two weeks later.
Ah, you've got the wrong end of the stick. The money they pass on that belongs to you still has a vat liability that you have to pay. I understand that.
However, how have they defined their role as a payment processor?
What I mean is, you sell a tshirt to an online customer. customer pays worldpay, worldpay pays you. but what defined them as a third party payment processor rather than a middle man?
tinman0 said:
What I mean is, you sell a tshirt to an online customer. customer pays worldpay, worldpay pays you. but what defined them as a third party payment processor rather than a middle man?
As far as I'm aware (only through other Payment Service Providers, WorldPay might be different), that's not quite how it works.
You sell the t-shirt, the online customer pays the money into your account via the PSP...all the PSP are responsible for is transferring the money from the customer's account into the retailers account, which is done directly. As such, the VAT on the product is charged by the retailer on the product, the processing fee and its VAT are charged to the retailer by the PSP.
Rob.
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