From 13 January 2018, businesses will no longer be able to add any surcharges where a customer pays by credit or debit card, following an EU directive banning surcharges on Visa and Mastercard payments.

However the government has gone further than the directive by also banning charges on American Express and PayPal, as well as tackling surcharges by local councils and government agencies.

Adding surcharges to card payments is common practice and these new rules will bring it to an end, leading most likely to some industries absorbing the cost and others passing them on in headline price rises.

The government wants to bring about fairness and transparency, so that individuals will not discover they are being charged more for using a card.

The government has previously capped the costs that businesses face for processing card payments, and will engage with retailers to assess if there is any more that can be done to help.

Payment of tax bills

A consequence of the change is that tax liabilities can no longer be paid by personal credit card.

HM Revenue & Customs (HMRC) has decided not to accept personal credit card payments from 13 January 2018 as it considers them too expensive to process.

This means businesses will have to use one of the following methods of payment when paying their tax:

  • Direct Debit
  • Faster Payment
  • Bacs

HMRC will accept cheques for personal tax liabilities, but it discourages payment of corporation tax by cheque.

The alternative is to use corporate, business and commercial cards and debit cards which are not affected by the new legislation. Such payments will be subjected to a surcharge. However, using a credit card linked to a business bank account is not a good idea, as it may create a benefit in kind charge.

HMRC has updated its web page with the various payment options.

If you would like to discuss the implications of this for your business, please contact your usual Bishop Fleming adviser.


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