Retailers – "merchant charges" arrangements
Retailers who have implemented "merchant charges" arrangements will be interested in a new EU Regulation, which may prevent the arrangements from being effective even if the
Court of Appeal’s decision in Debenhams is reversed by the House of Lords. The new regulation, which will come into effect from 1 January 2006, states that where the total price charged for goods or services remains unchanged, no matter what the method of payment, then the amount on which VAT is charged is not affected (i.e. reduced) where a card handling fee is levied as part of the amount paid by the customer. Debenhams is currently waiting to see if the House of Lords will hear its appeal.
