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Ground-breaking VAT decision for mail order and delivery businesses

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28th April 2009


Companies which have had contracts with Royal Mail may be eligible for large VAT claim

The European Court of Justice has just released its opinion on the VAT liability of Royal Mail's postal services, a case that has been rumbling on for some time. Historically, Royal Mail has been able to treat all its services as VAT exempt, with other postal service providers (DHL, TNT etc) being required to charge VAT. The ECJ has ruled that this historic position distorts competition.

"As a result of this decision, certain of Royal Mail's services, being those negotiated on individual terms, are no longer exempt, but are subject to VAT. The High Court in the UK needs to determine the exact services of Royal Mail that should be subject to VAT, but in the meantime, businesses which have had a contract with Royal Mail at any time since 2000 should submit a protective VAT claim. Even though we await a final outcome from the United Kingdom's High Court, businesses should get the reclaim process underway," said Hannah Dobson, VAT director at Smith & Williamson.

What does the decision mean?

  • Companies that have individual contracts with Royal Mail could have a VAT claim to make - services previously billed by Royal Mail as VAT exempt could be treated as VAT inclusive, and companies could claim the relevant VAT percentage of amounts previously paid to Royal Mail;
  • Claims could be restricted to three or four years (latter from 1 April 2009), or potentially claims could go back to 2000 when Royal Mail's services were opened up to competition;
  • Protective claims should be submitted now whilst HMRC decides what to do about this case in the UK.

This case will be relevant for any of the following types of businesses:

  • Mail order companies;
  • Leaflet delivery companies;
  • Envelope filling and drop companies;
  • Companies with subscription services that include the delivery of magazines (eg. Sky, Virgin Media etc);
  • DVD delivery companies;
  • Any business that has a contract of some description with the Royal Mail.

 

For further information:
John Rainsford, associate director VAT at Smith & Williamson, the accountancy and financial services group
T: 020 7131 4332
E: john.rainsford@smith.williamson.co.uk

PR queries:
Kate Harrison 020 7131 4228
Jess Koslow 0207 131 4264

Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Note to editors
Smith & Williamson is an independent professional and financial services group employing 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Glasgow, Guildford, North London, Maidstone, Salisbury, Southampton, and Worcester.

Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International, a worldwide network of independent accounting firms.