HMRC has recently confirmed that with effect from 31 January 2011, standard rated VAT will be added to the cost of certain postal services in the UK, following a successful legal challenge by TNT Post (UK) Ltd.

Examples of supplies on which VAT will be charged from that date include:

• All individually negotiated services
• ParcelForce services
• Door – to – door (unaddressed mail services
• Mailroom services provided by the Royal Mail (including ParcelForce)

Historically, these services have been considered VAT exclusive, but Royal Mail is likely to have to treat them as VAT inclusive and pay over the VAT element to HMRC

What should you do now?

The past

Businesses that have used the Post Office services affected by the change should consider submitting retrospective claims for the last 4 years, on the basis that the costs of the affected services have always been VAT inclusive.

Where the VAT cannot be recovered in full, a claim can still be made in respect of the portion of VAT which is recoverable.

In future

Businesses should review their postal costs to check whether it will still be cost effective to use ParcelForce or the other affected services, and also review their VAT recovery methods in light of the forthcoming change.

Businesses who could be affected by this change include:

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

If you believe you are entitled to a VAT refund and would like to consider submission of a claim, please contact Ilyas Patel at ilyas@taxexpert.co.uk t: 01772 788200

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