Go Cardless are one of the most popular Direct Debit solutions for small businesses, as the system integrates beautifully with Xero and Quickbooks. They’ve recently had to change their stance on VAT, but there’s some good news for current customers!

The Background

Go Cardless had previously been exempt from chasing VAT on the fees they charge customers to use the system. This has now been changed by HMRC, and Go Cardless need to pay over the VAT on their fees, backdated to 14th April 2020.

Go Cardless are absorbing the cost of this VAT from April to 31st August, and will only start to pass this cost on to customers from 1st September 2020.

What does it mean to Go Cardless customers?

If you’re VAT registered, you can reclaim the VAT on fees, in the usual way.

If you’re not VAT Registered, you won’t be able to reclaim VAT, and will see an increase in your costs from 1st September. There is a VAT Relief Fund that Go Cardless are launching, to help smaller, non VAT registered customers who will be hit by this increase, which you can find out about here from the 15th June.

What do you need to do?

• If you are a VAT Registered Go Cardless user, you’ll need to provide them with your VAT Registration number, which you can do here from 15th June.
• From 1st September, you’ll be able to download VAT invoices from Go Cardless, that will show the amount of VAT that they will be paying over to HMRC. This is a percentage of the amount you have already paid to them and there is no additional amount for you to pay.
• The Good News: If your business is VAT registered, you can reclaim this VAT amount from HMRC as part of your next VAT Return, thereby effectively reducing your costs for the period.

This VAT adjustment is ONLY on the fees that Go Cardless charge, so for many small businesses it’s not a huge amount. The good news though is that not only are Go Cardless not looking to customers to pay the backlog of VAT, but there is the opportunity to claim what would have been the VAT element too.

Our recommendation would be that Go Cardless users diarise to add their VAT number to the system and to download VAT invoices as soon as possible.

As someone once said, every little helps!

If you’re unsure about how this might affect your business, how to account for the VAT in your next Return, or would like to discuss the benefits of using Direct Debit in your business, please get in touch!