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Supplies of postal services made 'by the public postal services' are exempt from VAT under EU law.
In the UK, this is limited to Royal Mail and covers all of its postal services. All other postal operators have to charge VAT at the standard rate on their services.
Following a legal challenge to the scope of the exemption as applied in the UK, the European Court of Justice in R (on the application of TNT Post UK Ltd) v CRC (Royal Mail Group Ltd, interested party) (Case C-357/07) [2009] STC 1438 has confirmed that Royal Mail is the only postal body in the UK eligible for the exemption.
However, it also ruled the exemption does not apply to supplies made by Royal Mail for which the terms have been individually negotiated.
As a result, some of the services supplied by Royal Mail which have been treated as exempt will become liable to VAT. HMRC, say in Revenue & Customs Brief 64/09 that they are currently discussing with Royal Mail to establish precisely which of their services will be affected and further guidance will be issued once these discussions are complete.
Any changes will be implemented from a future date but, in the meantime, HMRC say that all postal services provided by Royal Mail remain exempt from VAT.
