TT149: VAT on Postal Services – Potential Refund Claim?

April 22, 2010

Following a legal challenge to the scope of the postal services exemption applied in the UK, the European Court of Justice (ECJ) has confirmed that Royal Mail, as the operator providing the public postal service, is the only postal body in the UK eligible to exempt postal services from VAT.

However, the ECJ also ruled that exemption does not apply to supplies made by Royal Mail for which the terms have been individually negotiated or unregulated services. This means that services supplied by Royal Mail which are not subject to any price or regulatory control, which have been treated as exempt, will become liable to VAT at the standard rate with effect from 31 January 2011.

The proposed changes will mean that any service which is individually negotiated or not subject to any price and regulatory control will become liable to VAT at the standard rate. Such supplies include:

  • All individually negotiated services;
  • Parcelforce services;
  • Door-to-door (unaddressed mail);
  • Mailroom services.

Although these services will not become liable to VAT at the standard rate until 31 January 2011, HMRC has announced that it will be accepting retrospective claims for VAT refunds on the basis that part of the price paid for postage was in fact VAT, although it was not separately disclosed as such on the invoice.

This means there is a potential refund opportunity for clients with bespoke postage or Parcelforce agreements. These could include:

  • Mail order businesses,
  • Online retailers,
  • Charities which circulate large volumes of printed material,
  • Members organisations,
  • Retail financial service provider
  • Print companies that act as a mailing house.

The claim will be calculated on the basis that the claimant has been incurring VAT inclusive standard-rated services for the past four years.

If you believe this applies to you and would like to consider submission of a refund claim, please do not hesitate to contact us.

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