Ever noticed in large chain stores (Tescos, Marks & Spencers, etc) that little sign at the checkout that says "By agreeing to purchase from XXX you agree that XXX Financial Services Ltd will charge a 2.5% transaction fee. The amount you pay is the same".
Well, today, I worked out what it is all about. It’s a V.A.T. loophole.
Basically, on pretty much everything you purchase the store has to pay Customs & Excise the relevant amount of V.A.T. on that purchase. However, financial services are zero vat rated, so for the store these small percentages really add up to a large sum of money that they don’t have to pay any VAT on. Nice scam if you’re big enough to work the system, eh?