VAT – Postal Services
With all the ongoing talks about postal strikes HMRC have issued a timely Revenue & Customs Brief stating that certain unusual postal services provided by the Royal Mail are to become subject to VAT at the standard rate.
This change follows a case brought to the European Court of Justice (ECJ) by another UK provider of postal services that is required to charge VAT at the standard rate on its services. The ECJ confirmed that the Royal Mail is eligible to provide postal services which are exempt from VAT. It also ruled that the VAT exemption does not apply where supplies are made by Royal Mail for which the terms have been individually negotiated.
At this stage it is not clear exactly which services will be affected. However the changes are likely to relate to services provided by the Royal Mail which are individually negotiated or not subject to price and regulatory controls.
HMRC are currently in discussions with the Royal Mail to ascertain which services may be subject to VAT and will issue further guidance once these talks have been completed. At the present time all postal services provided by the Royal Mail remain VAT exempt.