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Claims for refunds of VAT incurred on postal services purchased from Royal Mail have been held in abeyance by HMRC pending discussions about the impact of the European Court of Justice’s decision in R (on the application of TNT Post UK Ltd) v CRC (C357/07).
The discussions have now ended, and certain services previously treated as exempt from VAT will become liable to the tax at the standard rate with effect from 31 January 2011.
The proposed changes will broadly mean any service that is individually negotiated or not subject to any price and regulatory control will become liable to VAT at the standard rate. This includes, but is not limited to:
- All individually negotiated services.
- Parcelforce services.
- Door-to-door (unaddressed mail).
- Mailroom services.
Services which Royal Mail has to provide under the terms of its licence will remain exempt from VAT.
George Bull of Baker Tilly said, ‘HMRC have accepted this means that the same principle can potentially apply retrospectively where businesses have purchased such services from the Royal Mail.
'Subject to the facts, the effect of this is that such businesses may be able to submit substantial claims for input VAT in respect of these services.’
For further details, see here.
