As announced in the Budget, changes were made by the Finance Act 2015 to levy stamp duty on withdrawals of cash from automated cash machines. This was to replace the flat rate charge on debit and cash cards and comes into effect from January 1st.
The news generated some media attention at the time and in December 2015 even the European Central Bank (ECB) was drawn into offering an official opinion. The ECB, which was not consulted about the measure, takes the view that all forms of payment are equal. So it considers that legislation should not make the use of banknotes more expensive than electronic methods of payment, as this puts them at a disadvantage. The ECB acknowledges that the stamp duty charges are at a low level, but is obviously concerned that it sets a precedent and so recommends that the measure be reconsidered.
Needless to say the measures have not been reconsidered and the new levy came into effect on January 1st.
What Is The New Levy?
The new levy is charged at €0.12 on each withdrawal made from an ATM subject to an annual cap of either €2.50 or €5.00 depending on the type of card used.
What Was The Old Levy?
Before January 1st, a flat rate annual charge of €2.50 or €5.00 was made depending on the type of card held.
What Has Changed?
Aside from charging the levy on a transaction basis, it is notable that there is now no charge if you have a debit-only card. There is also no charge for a combined debit and cash card which you use for debit purchases, but never make cash withdrawals.
What does all this mean in practice?
Firstly, as the ECB acknowledge, these amounts are pretty low level and so unlikely to make much of a real difference to individuals. However, if like me you are irritated at paying for the privilege of accessing your own money please read on!
In practice most people probably have a combined debit and cash card. If this is used for both debit and cash purchases during the year, then the annual cap is €5.00 (if only cash withdrawals and no debit purchases are made on the card the cap is lowered to €2.50). A €5.00 cap is reached once 42 cash withdrawals have been made. So a person with a combined card who uses the debit function and withdraws cash once a week for a trip to the pub or to cover lunch money will trigger the cap and be paying the €5.00 stamp duty levy. Having said that, their situation is no different to what it was in 2015 as they paid €5.00 under the old rules anyway.
If your bank account offers a cash-only and a debit-only card on your account and you don’t mind having 2 cards there would be an advantage to taking this option. The annual cap for cash-only cards is restricted to €2.50 and there is now no charge for the debit-only card.
For a joint account used by a married couple or civil partnership, where both have combined cards then there would be an advantage if only one of the parties withdraws cash needed by the couple. Under the old levy €10.00 overall would have been paid by the couple, but now at least it would be possible to limit this to a maximum of €5.00.
It is notable that the levy applies to withdrawals from ATMs. So if you go into the bank and withdraw cash from the teller at the counter the €0.12 should not apply. You may want to check your bank interprets the rules this way. Then at least you could consider whether the queue is worth €0.12!
Of course, the amounts involved are small and for most of us our need for convenience means that the efforts to save a few cents are unlikely to be worth it.
Are the ECB right to be concerned? Are there wider implications for businesses?
Well it is interesting to note the pressure to move away from cash. While it has been convenient to use electronic payment methods for larger amounts for many years, cash is still often favourite for smaller items. As an example though, I recently visited London and thought to catch a bus. Surely a prime candidate for paying by cash. However, when I tried to pay with cash it was rejected! Outside of having an Oyster card (a dedicated payment card that can be used in the London Transport system) the only way I could pay was with a debit or credit card that was enabled for contactless payments.
Many business and shop owners have steadfastly stuck to ‘cash-only’ and refused to go down the road of card machines because of the charges involved or fearing the complications. We seem, though, to be heading towards a time where ‘cash-only’ will cease to be a commercial option. As consumers become used to electronic forms of payment a ‘cash-only’ business may find that it is losing customers. While regrettable businesses may need to start reconsidering their strategy in this area.