When customers pay for goods by credit or debit card at some large UK stores, including Debenhams, they have been asked to pay a 2.5% card handling fee.

This has happened even though the price is exactly the same as it would be for cash or cheque purchase.

Retailers have claimed that the handling fee should be exempt from VAT.

But, in a ruling delivered on Tuesday, the Independent VAT tribunal said that the actions of the retailers amounted to VAT avoidance and said the practice should cease.

Customers will be unaffected by the ruling, but retailers' profits are likely to be hit.