Processing refunds correctly is one of the most important operational tasks for any UK business taking card payments. Get it wrong and you risk chargebacks, disputes, and unhappy customers.
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EPOS systems handle refunds differently depending on the provider and payment method. Some process instant refunds to the original card; others take 5-10 business days. Cash refunds, card refunds, and exchange policies all have different implications for your accounts.
This guide covers how refunds work through UK EPOS systems, your legal obligations, and practical tips for managing returns efficiently.
- Refunds through UK EPOS - systems are straightforward when properly configured
- Square and SumUp charge no - refund fees and return the original transaction fee
- Set manager approval thresholds - always refund to the original payment method, and keep clear records for chargeback defence
- For choosing the right EPOS system - see our 7 best EPOS systems, or compare EPOS costs for pricing details
How EPOS Refunds Work
EPOS refunds reverse the original transaction by crediting the customer’s payment method. Card refunds typically take 3-10 business days to appear in the customer’s account, depending on their bank and your EPOS provider.
When you process a refund through your EPOS system, the software creates a reversal transaction linked to the original sale. Here’s what happens for each payment type:
Card refunds. The refund is processed back to the original card. Your EPOS provider sends a credit transaction to the card network (Visa, Mastercard), which routes it to the customer’s bank. Processing time varies: Square and SumUp typically credit within 2-5 business days; traditional merchant accounts may take 5-10 days.
Cash refunds. Processed through the EPOS till as a negative transaction. The cash drawer opens for the refund amount. Your daily totals and inventory automatically adjust.
Exchange/credit note. Most EPOS systems let you issue store credit or process an exchange without a cash or card refund. This keeps the revenue in your business while satisfying the customer.
Refund Policies by EPOS Provider
Square charges no refund fee and returns the original transaction fee. SumUp also charges no refund fee. Epos Now refunds depend on your payment processor’s terms. All major UK EPOS providers support full and partial refunds.
| Provider | Refund Fee | Transaction Fee Returned? | Refund Time | Partial Refunds |
|---|---|---|---|---|
| Square | £0 | ✓ Yes | 2-5 business days | ✓ Yes |
| SumUp | £0 | ✓ Yes | 2-5 business days | ✓ Yes |
| PayPal Zettle | £0 | ✓ Yes | 3-10 business days | ✓ Yes |
| Epos Now | Depends on processor | Depends on processor | 5-10 business days | ✓ Yes |
| Lightspeed | Depends on processor | Depends on processor | 5-10 business days | ✓ Yes |
Key point: Square and SumUp both return the original transaction fee when you process a refund. This means a refund costs you nothing – you’re not out-of-pocket for the processing fee. Not all providers do this, so check your terms.
UK Legal Requirements for Refunds
Under the Consumer Rights Act 2015, UK customers have 30 days for a full refund on faulty goods, 6 months for repair/replacement, and 14 days to cancel online/phone orders under the Consumer Contracts Regulations.
UK consumer law sets minimum refund obligations that apply regardless of your store policy:
Consumer Rights Act 2015:
- 30 days from purchase: full refund if goods are faulty, not as described, or not fit for purpose
- 6 months from purchase: right to repair or replacement (refund if repair fails)
- Up to 6 years: consumer can claim if a fault existed at time of purchase
Consumer Contracts Regulations 2013:
- 14-day cooling-off period for goods bought online, by phone, or at a distance
- Customer must receive refund within 14 days of you receiving the returned goods
- Does NOT apply to in-store purchases – that’s at your discretion
Important: You’re not legally required to offer refunds on in-store purchases if the customer simply changes their mind (unless faulty). Many businesses offer a goodwill returns policy anyway, but it’s not a legal obligation. Your policy should be clearly displayed at the till and on receipts.
Setting Up Your Refund Process
Configure your EPOS to require manager approval for refunds above a set threshold (e.g. £50), set a clear refund window (14-30 days is standard), and always refund to the original payment method to prevent fraud.
A well-configured refund process protects your business from fraud and errors:
Manager approval thresholds. Set your EPOS to require supervisor authorisation for refunds above a certain amount (£50 is common). This prevents unauthorized large refunds. Square, Epos Now, and Lightspeed all support role-based permissions for this.
Original payment method. Always refund to the original payment method. Card payment = card refund. This is both fraud prevention (stops someone paying by card and getting cash back) and best practice for accounting.
Receipt requirement. Require the original receipt or order reference for refunds. EPOS systems can look up transactions by date, amount, or card last-four-digits if the receipt is lost – but having it speeds the process and reduces disputes.
Refund window. Set a clear policy (14, 28, or 30 days is standard for UK retail). Configure this in your EPOS so staff see a warning when processing refunds outside the window.
Exchange preference. Train staff to offer exchanges before refunds. An exchange keeps the revenue in your business and often satisfies the customer equally well.
Handling Chargebacks
Chargebacks occur when a customer disputes a card payment directly with their bank. Your EPOS transaction records, signed receipts, and delivery proof are your primary defence – respond within the provider’s deadline (usually 7-14 days).
Chargebacks bypass your refund process entirely – the customer’s bank reverses the payment and charges you a fee (typically £15-25). They happen when customers dispute transactions as unauthorized, fraudulent, or for goods not received.
Your EPOS records are your best defence:
- Transaction logs showing date, time, amount, and payment method
- Signed receipts or PIN verification records
- Delivery confirmation for shipped goods
- Correspondence with the customer about the purchase
When you receive a chargeback notification, respond within the deadline (7-14 days depending on your provider). Provide all evidence showing the transaction was legitimate. If the evidence is strong, the chargeback is reversed and the funds returned to you.
For detailed chargeback statistics and prevention strategies, see our chargeback rates guide.
Accounting for Refunds
EPOS refunds automatically adjust your sales totals, but you must reconcile refunds separately in your accounting software to ensure accurate VAT returns and profit reporting.
Refunds affect your accounts in three ways:
Revenue reduction. The refunded amount reduces your gross sales for the period. Your EPOS reports should separate gross sales, refunds, and net sales. If they don’t, you risk overstating revenue.
VAT adjustment. Refunds on VAT-inclusive sales mean you’ve over-collected VAT. Your next VAT return should reflect the reduced sales figure. EPOS systems integrated with Xero or QuickBooks handle this automatically.
Inventory return. When a product is refunded and returned, it should go back into your inventory. Most EPOS systems do this automatically when you process a return-and-refund. Check that returned items actually go back on the shelf – damaged returns should be written off, not re-added to sellable stock.
If you’re still choosing an EPOS provider, our guide to EPOS system costs breaks down what you’ll pay for hardware, software, and transaction fees across the main UK providers.
