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HMRC internal manual

VAT Finance Manual

HM Revenue & Customs
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Money (including transfer of money) and related services: automated teller machines (ATMs): ATM charges

Charges to ATM users

Fees charged to customers by ATM operators for the facility to obtain cash are known as convenience fees. These fees are often a flat rate fee. As mentioned above, financial members of LINK have generally chosen not to make these charges to the customer, and have opted to make the charge to the customer’s bank instead - see section below. Therefore this is a charge commonly made to the customer by the IADs. It is a requirement of LINK that ATM operators who charge customers a convenience fee warn them that they will incur this fee if the transaction is completed.

The convenience fee charged by an ATM operator is in respect of a supply exempt under item 1 as dealing with money. In the Tribunal case of Nationwide Anglia Building Society VTD 11826, it was found that for there to be a dealing with money the money must be used as money and not merely as goods. It went further to say the dealing with money takes place when the customer withdraws money from the ATM.

The VAT treatment of the convenience fee is not affected if the ATM operator retains ownership of their ATM machines but out-source the cash stocking of the machines to a third party such as a retailer.

Charges to banks

Often referred to as reciprocity or interchange fees, these are charges between banks when their customers use other bank’s ATM facilities. They are levied on a transaction basis (as opposed to a flat rate fee) and are exempt under item 1.

These fees were the subject of a Tribunal case, Royal Bank of Scotland [2002] STC 575 - see VATFIN2250. Non-cash withdrawal services are also available to customers via most ATMs. These are mainly balance enquiries and ‘mini-statements’. Where these transactions are followed by a cash withdrawal and a single interchange fee is charged to the counter-party bank, HMRC treat this as exempt under item 1. Charges for services other than cash withdrawal, for example for information only, are standard-rated.