HM Revenue and Customs Brief 19/10
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Issued 31 March 2010
VAT: postal services - claims for Input Tax
Following the European Court of Justiceís (ECJ) decision in the case of TNT
Post UK Ltd (see Revenue & Customs Brief 64/09), a number of businesses
submitted claims (including 'Fleming' claims) for a refund of VAT incurred on
postal services purchased from Royal Mail. These have been held in abeyance by
us pending discussions about the impact of the decision. These discussions have
now been concluded and, as announced in the Budget Note 48, certain services
previously treated as exempt from VAT will become liable to VAT at the standard
rate with effect from 31 January 2011. This brief is to advise that we will now
begin considering these claims and the criteria which will be applied.
In essence, the ECJ confirmed that Royal Mail, as the operator providing the
public postal service, is the only postal body in the UK eligible to exempt
postal services from VAT. However, it further ruled that exemption applies to
the public postal services (that is, Royal Mail), acting as such and does not
apply to supplies where the terms have been individually negotiated.
Accordingly, UK VAT law is being amended to bring it in line with the ECJ
decision. The government intends to make the necessary legislative changes in a
second Finance Bill 2010 to be introduced as soon as possible in the next
In broad terms, the proposed changes will mean that any service which 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 is obligated to provide under, or pursuant to, the
terms of its licence - and which are therefore subject to price and regulatory
control - will remain exempt from VAT (subject to there being no individual
negotiation). This means:
- services covered by Royal Mailís Universal Service Obligation (including
- regulated services
- access to its network for private postal operators
Detailed guidance on can be found in our Technical Note issued on Budget Day
Handling of claims
To be valid, a claim must have included the information required, as set out
in Notice 700/45 How to correct VAT errors and make adjustments or claims.
Claims that do not meet these basic criteria will be rejected.
Where a valid claim has been submitted, we will consider:
- the contractual arrangements between the claimant and Royal Mail over the
period of the claim
- (in relation to 'Fleming' claims only) developments in the postal market
and related legislation over the period of the claim
- whether the supplies to which the claim relates would have been taxable at
the standard rate under the new rules
- evidence that Input Tax has been incurred.
Unless they were made under the transitional provisions in section 121(2) of
the Finance Act 2008 (Fleming claims), all claims will be subject to the
four-year time limit in regulation 29(1A) of the VAT Regulations 1995.
For further information please contact the Helpline on Tel 0845 010 9000.
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Article Published/Sorted/Amended on Scopulus 2010-06-14 12:01:34 in Tax Articles