One of my clients charges a 2% finance charge to customers paying by credit card as that is roughly the charges they incur when processing these payments. Am I correct in thinking that there is no output VAT on these finance charges? The charges that we incur from the card machine provider are non-VATable I know and I process these using code T2 on Sage. In addition, should I show the 2% finance costs that we charge as income or as a reduction in financing costs?
Thanku very much for your reply. The link that you posted was really informative and much appreciated and I now concur that the entire amount paid by our customers including the finance charge is subject to VAT.
