Claiming bank charges?

[TheAngryDog]

Something I have always wondered. If you sell something as a business and take payment via credit card, you get charged a transaction fee by your bank. Can these be claimed back as part of a tax return?

[sgrimshaw]

Bank charges / fees etc are legitimate business expenses and would be an allowable expense against tax. Essentially, it will be a cost taken into account when calculating net profit.

[Eric Mc]

If you are charged for using Credit Card machines etc to handle customers who pay you by credit card or some other type of card, the costs associated with operating those machines and systems are legitimate business costs and can be offset against the business profits.
These are usually referred to as "Merchant Charges" and are a direct selling cost as opposed to an "Overhead".

Bank charges in respect of the business using its own bank account are referred to as "Bank" or "Finance Charges" and are usually treated as an overhead.

[TheAngryDog]

Thanks guys. So effectively, if you used Paypal to sell an item, lose the 3.4% and 20p they charge for a non-gift transaction, you can claim the full amount back?

[Dr Interceptor]

They are not 'claimed back'.

It is a cost to the business, or a cost of sale, so it reduces your profitability, and the sum that you pay tax on.

[dartissimus]

Most Merchant Service providers raise one invoice for charges per month.

However companies like Amex and Paypal take their charges each time before passing the balance on to you; you need to raise a sales invoice for the total amount they have deducted and pay the HMRC the VAT element of this total, and you'll also have to show what been deducted by them to order to have a claimable expense.
It's a tedious horrible mess

Personally, I show their charges as both a cash receipt and cash expense.

Edited by dartissimus on Friday 26th May 14:33

[Eric Mc]

Dr Interceptor said:

They are not 'claimed back'.

It is a cost to the business, or a cost of sale, so it reduces your profitability, and the sum that you pay tax on.

Exactly - it's just another business cost that you deduct when calculating the business profit or loss.

It's not a "tax" matter - it's an "accounting" matter. A business needs to account properly for its income, costs , assets and liabilities. That is basic stuff and is independent of tax rules and regulations.