credit card charges

[tax-bill]

An hotel has income of £1000 from rooms and drink and payment is made via credit card payments. After deduction of charges the hotel receives £965 from the credit card companies. Should the VAT element be calculated on the gross figure of £1000 or on the actual amount received of £965.
Has anyone queried this with HMRC

Hope someone can give me a definitive on this.
Thanks
Tax-bill

[Generix]

VAT is payable on the full £1000.

There is one supply between the hotel and its customer, for which there is consideration of £1000.

There is a seperate supply between the credit card co / clearing agent and the hotel for which there is consideration of £35.

The mechanism for settlement of the debt between the CC co and the hotel is inconsequential for the purposes of determining the taxable value of the supply between the hotel and the customer.

[Generix]

You might want to read the debenhams case which basically had retailers set up an in-house clearing co, and customers would - in some cases unknowingly - be paying an exempt fee (0.5% of transaction value)to the card handling co, and then the rest of the value would be assigned to the retail transaction and taxable...So kind of sought to get the same result as you are looking to, albeit keeping all the income in house.


Ultimately Debenhams lost - although mainly due to bad implementation, in any case subsequent cases seeking to achieve a similar position haven't done too well.

Also the case (forget the name - very recent) - possibly T-mobile (or a linked case) - stating that certain card handling services are actually taxable debt collection services, and not exempt under Sch9Grp5.

All semi related to your scenario/