VAT & Royal Mail

Information on VAT and Royal Mail postal services

The Government has announced that VAT at the standard rate will apply to certain Royal Mail postal services from 31st January 2011. The VAT application has become necessary because of a European Court of Justice ruling on the VAT liability of Royal Mail’s postal services. Traditionally the Royal Mail services have been VAT exempt, with other postal service providers required to charge VAT on similar services.

Now the court has decided that this historic VAT tax break – allowable by the Revenue because Royal Mail was a taxpayer owned operator – damages competition. In a case brought by TNT, it was found that the VAT tax exemption should not apply to items of post that are subject to competition: in other words – business post. So while standard stamped and franked post delivered by Royal Mail will remain exempt from VAT, other items will bear the Value Added Tax cost.

The Independent quoted Madsen Pirie, the president of free-market think tank Adam Smith Institute, saying that Royal Mail's VAT exemption was anti-competitive. "The Post Office is uniquely exempt from paying VAT on its services, as its would-be competitors have to," Pirie said. "This means that a rival has to be 15 per cent more efficient to compete effectively - most markets are won or lost on much smaller percentage margins than that."

Royal Mail's VAT exemption and other privileges, such as parking rights in urban areas, have been the target of criticism by competitors since the market was deregulated in 2003.

The majority of Royal Mail’s customers will not be affected by this change. Most services will remain exempt from VAT. In particular, First and Second Class stamped and franked mail and standard parcels. You won’t pay VAT when you buy stamps.

The full list of products liable to VAT from 31st January 2011 which also provides further information about prices can be found on the Royal Mail website and they will be writing to account customers directly affected by these changes.

Prices

Royal Mail are not increasing the prices of any of our UK services on 31st January 2011; Royal Mail are only applying VAT to our existing prices for the services affected.

Further advice

Many businesses can recover their VAT but Royal Mail do appreciate that some cannot. For professional VAT advice Royal Mail suggest you contact your Finance department, Accountant or Tax Advisor, as Royal Mail cannot provide tax advice.

International contract mail

From 31st January 2011 international contract services to EU countries will be liable to VAT. You won’t see the names of all these services in the lists on this page because Royal Mail are currently improving and simplifying our international contract range. Royal Mail will announce more details in December

Franked mail

You will not be able to buy affected products using a standard franking machine from 31st January 2011. They will still be available if you have a “smart” meter which can handle VAT. Royal Mail suggest you speak to your franking supplier to find out more.

Online postage

You will not be able to buy affected services on SmartStamp® and Online Postage for a while. You can still buy them at Post Office® branches and on account.

Summary

These are some of the services Royal Mail will charge VAT on:

Express and Tracked services

• Special Delivery 9.00a.m. Stamp, Franking and Account
• Special Delivery Next Day Account
• Royal Mail Tracked and Tracked Next Day
• Royal Mail Sameday

 International Services (VAT will only be added to EU destinations)

• International Contract Services
• International Airsure
• International Admail and Admail Packets
• International Redirections

 Advertising, Catalogues and Magazine Services

• Big Book
• Royal Mail Heavyweight
• Mail Media

 Unaddressed Mail

• Door to Door

 Receiving and Managing Mail Services

• Keepsafe
• Timed Delivery
• Early Extraction
• Early Collect
• Selectapost

 Other Services

• Business Mail Secure
• Admail
• Local Collect
• Callers Services
• Rural Deliveries
• Rural Carriage of Goods

 Contract Services

• Presorted Delivery
• Mailroom Management
• Mailroom Consulting Services
• Royal Mail Relay

These are some of the Royal Mail services that remain exempt from VAT

UK Services

• First and Second Class (Stamped, Franked and PPI)
• Special Delivery Next Day (Stamped and Franked)
• Standard Parcels
• Recorded Signed For
• Cleanmail, Cleanmail Plus and Cleanmail Advance
• Mailsort (70, 120, 700 and 1400)
• Walksort
• Presstream
• Sustainable Mail

 International Services

• International Airmail
• International Surface Mail
• All HM Forces Mail (BFPO)

If you have any questions about how VAT on postal services affects your business, contact your Royal Mail Account Manager or call Customer Services on 08456 113 421, Monday to Friday 08:00 to 18:00.