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Is There VAT on Card Fees? Stripe, SumUp, Square and Zettle Compared (UK)

Most card processing fees carry no UK VAT. HMRC lists the charge card companies make to merchants as exempt. But some providers bill part of the fee from abroad, and some lines on a statement are not processing at all. Here is what each provider says, and how to record the fees in Xero or QuickBooks.

Sumcraft Editorial Team8 min read

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Checked on 24 October 2026. VAT rules come from HMRC's published notices and manuals. Provider positions come from each provider's own terms and support pages, and from Square's community moderator. We could not find a stated VAT position for SumUp. This is not tax advice. Your accountant should confirm the treatment for your business.

The rule HMRC publishes

ChargeVAT treatmentHMRC source
The charge card companies make to merchantsExemptVAT Notice 701/49, section 4.8
Card terminal rentalTaxable, unless part of other exempt card servicesVAT Notice 701/49, section 4.8
Card processing that is mainly technical and administrative workTaxable, following the Bookit and NEC court casesVAT Finance Manual, VATFIN2450
A surcharge you add for customers paying by cardSame VAT rate as the goods or services you soldVAT Notice 701/49, section 4.7

The line between an exempt card service and taxable technical processing depends on what the provider actually supplies. That is why each provider's own position matters.

What each provider says

ProviderWho supplies the feeWhat the provider says about VAT
StripeStripe's European services come from its establishment in IrelandStripe "does not charge VAT on Stripe fees" except in four listed places. These are Ireland, Norway, Switzerland or Liechtenstein and the UAE. The UK is not listed. Stripe says to ask a tax adviser about the reverse charge
SquarePayment processing: Squareup Europe Limited, a UK company. Software fees: Squareup International Limited, an Irish companySquare's SaaS terms say software fees are "exclusive of any value added tax". A Square moderator said processing is a VAT-exempt supply and the software fees are zero-rated
SumUpYour contract is with SumUp Payments Limited in London. SumUp may bill fees from any company in its groupSumUp's general terms do not mention VAT. We could not find a published VAT position
ZettleZettle's UK terms (February 2021) are with PayPal (Europe) S.à r.l. et Cie, S.C.A. in LuxembourgThe general terms do not mention VAT on transaction fees. Zettle's Food & Drink subscription terms say those fees exclude VAT and VAT "will be charged in accordance with local VAT legislation"

Square's moderator also said "Payment Services Fees account for 1.1% of each transaction". The rest of the fee is software fees. That split came from a 2023 community reply, not from Square's terms. Ask Square to confirm it for your account.

Does Stripe add 20% VAT? Not according to Stripe

Several UK pricing guides say Stripe adds 20% VAT to its fees. Stripe's own support page says otherwise. It supplies European accounts from Ireland and charges no VAT on fees, with four listed exceptions. The UK is not one of them. Check your own Stripe invoices in the Documents section of the Dashboard, then follow what they show.

When the reverse charge comes in

Stripe and Square's software arm bill from Ireland. For services bought from a supplier outside the UK, HMRC's VAT Notice 741A sets out the reverse charge:

  • It "applies to almost all B2B (business to business) supplies of services except exempt supplies".
  • You enter output tax in box 1 and the same amount as input tax in box 4.
  • The value of the service goes in box 6 and box 7.
  • If you can recover all your input tax, it costs you nothing overall.

So the question is whether the overseas fee would be exempt if supplied in the UK. Exempt card services fall outside the reverse charge. Taxable services such as software fall inside it. Square's moderator said UK VAT-registered sellers can self-account for its software fees under the reverse charge. Stripe leaves the decision to you and your adviser.

How to record card fees

  1. Record the full sale. HMRC says VAT is due on the full price charged to your customer. Do not record the net payout as your sales figure.
  2. Record the fee as a separate cost. Use a clearing account if your payouts arrive net. It should come back to zero once the sale, fee and payout are all entered.
  3. Pick the tax rate from the invoice or statement. Exempt fees go on an exempt rate. Fees with UK VAT shown on a valid VAT invoice go on the standard rate. Overseas fees your accountant treats as taxable go on a reverse charge rate.
  4. Check what your integration posts. SumUp's own Xero integration creates fees as bills, according to its Xero App Store listing. Check the tax rate on those bills.
TreatmentXeroQuickBooks Online (UK)
Exempt feeAn exempt rate on purchasesNo VAT (exempt). QuickBooks says exempt purchases go to box 7
UK VAT shown on a VAT invoiceStandard rate (20%)20.0% S
Reverse charge on overseas servicesReverse Charge Expenses (20%). AccountingWEB users report it posts to boxes 1, 4, 6 and 720.0% RC SG. QuickBooks says VAT goes to boxes 1 and 4, and the net amount to boxes 6 and 7

Quick answers

  • Is there VAT on card processing fees in the UK? Usually not. HMRC lists merchant charges by card companies as exempt. Some technical processing and terminal rental can be taxable.
  • Can I reclaim VAT on Stripe fees? Only VAT you have actually been charged or accounted for. Stripe says it does not charge VAT on fees to UK accounts. Ask your accountant whether the reverse charge applies.
  • Are SumUp fees VAT exempt? SumUp's terms do not say. Check your fee statement and ask SumUp in writing.
  • Is there VAT on Zettle fees? Zettle's general terms do not say. Its Food & Drink subscription fees exclude VAT, with VAT added under local law. Accountants on AccountingWEB in 2022 believed transaction fees were exempt.
  • Should I record SumUp or Zettle payouts as my sales? No. Record the full sale and the fee separately. Otherwise your output VAT will be too low.
  • Do I charge VAT on a card surcharge? Yes, at the same rate as what you sold. HMRC treats the surcharge as part of the price.

For VAT rate problems on the sales side, see our guide to Square and SumUp VAT mismatches in Xero.

Sources, checked 24 October 2026:

  • VAT
  • Card fees
  • Xero
  • QuickBooks
  • Small business

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