Ever noticed in large chain stores (Tescos, Marks & Spencers, etc) that little sign at the checkout that says "By agreeing to purchase from XXX you agree that XXX Financial Services Ltd will charge a 2.5% transaction fee. The amount you pay is the same".
Well, today, I worked out what it is all about. It’s a V.A.T. loophole.
Basically, on pretty much everything you purchase the store has to pay Customs & Excise the relevant amount of V.A.T. on that purchase. However, financial services are zero vat rated, so for the store these small percentages really add up to a large sum of money that they don’t have to pay any VAT on. Nice scam if you’re big enough to work the system, eh?
So thats what that bloody well refers to then! Had wondered for ages (but never bothered me backside to find out). Nice one mate.
The downside is, if you are a business that can claim back V.A.T. then you can not claim the vat from the 2.5%. So when you get the invoice, the VAT total is less than 17.5% of the net.