Due to a change in the application of tax law from the 14th of April 2020, GoCardless can no longer benefit from a VAT exemption applying to the supply of payment services.
Therefore, GoCardless is now required to charge VAT at the UK Standard Rate, currently 20%, across all the fees that they charge for their services to merchants operating in the UK. VAT will be charged on all services, including borderless payments capability and multi-scheme offerings to collect payments from abroad, provided to customers, whose legal entity is located in the UK.
Given the current situation with Covid-19, GoCardless have decided to absorb the cost of VAT for existing customers until the 1st of September 2020 so that they can give you sufficient notice to adapt to this change. They will start to charge VAT on all of their fees from the 1st of September 2020. VAT will be applied to all fees that they charge including transaction fees, any monthly or annual commitment fees, fees for failures, chargebacks, refunds or high value transactions, add-on fees for Plus or Pro packages and any account servicing fees. When transaction fees are capped, VAT will be calculated on the capped amount.
To show you an example for the VAT calculation on a transaction fee: if your total transaction value is £200, the GoCardless fee before VAT will be £2 + 20 pence. The amount of VAT on that transaction will be 20% of their fee, in this case £0.44. The total GoCardless fee on this transaction will therefore be £2.64 (£2 + 20 pence + VAT).
If you are VAT registered then you will be able to recover the cost of VAT. All VAT invoices will be made available to you for you to reclaim VAT, including for the period from 14th of April 2020 to the 31st of August 2020. If your fees are deducted directly from your payouts, a monthly VAT invoice will be available to you in your GoCardless dashboard from September onwards. If you normally pay by invoice, a VAT invoice will be sent by email from September onwards. VAT invoices will include a breakdown of the VAT amount charged. Please provide GoCardless with your VAT registration number on the VAT status registration form (https://support.gocardless.com/hc/en-gb/requests/new?ticket_form_id=360000734919) where you will be able to fill your VAT registration number after having selected “VAT registered” in the VAT Status field.
If your goods or services are VAT exempt or your business falls under the threshold for VAT registration, you will still need to pay VAT. If you activated your account or signed a contract before 1 June 2020 you can provide GoCardless with documentation to demonstrate your VAT exempt status, or that your business falls under the VAT registration threshold and they will assess the impact of the VAT charge and work with you to mitigate the VAT impact. GoCardless will be accepting form applications (https://support.gocardless.com/hc/en-gb/requests/new?ticket_form_id=360000734919) until the 1 August 2020.