Impact of VAT on Royal Mail and ParcelForce

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Royal Mail and Parcelforce have today announced the full impact of VAT changes which will affect the cost of postal services as of the 31st January 2011.

The majority of Royal Mail’s customers won’t be affected by VAT but many online businesses will due to the nature of the services that they use.

The services that will attract VAT are International Airsure (to EU destinations), Special Delivery by 9am and Royal Mail Tracked. In addition if you access any Special Delivery service through a contract then it will also attract VAT.

All Parcelforce domestic and EU services will also attract VAT at 20% from 31st January 2011.

For both Royal Mail and Parcelforce none of the base cost prices that you currently pay will be affected, VAT will simply be added at the standard rate and those able to reclaim the VAT will do so through their normal VAT returns.

Services which won’t attract VAT include 1st and 2nd class (Including Stamped, Franked and PPI services – if you use Packet Post you won’t be charged VAT), Special Delivery, Standard Parcels, Recorded Signed for and International Airmail.

There are also a couple of services which won’t normally attract VAT but will do so when purchased with enhancements which include Special Delivery with Saturday Guarantee or consequential loss, Standard Parcels with additional compensation, International Airmail when purchased with Airsure and International Signed for when purchased with Advice of Delivery.

As a result of the changes Special Delivery 9am, Standard Parcels when purchased with additional compensation and Airsure will no longer be available for purchase through Smart Stamp, Online postage at Royalmail.com or through eBay/PayPal postage.

How these changes will affect you will depend on your VAT status and which Royal Mail and ParcelForce services you currently use and in some cases how you purchase the services. For many it will simply be an administrative process where they need to reclaim any VAT charged and a cash flow burden as they’ll need to pay Royal Mail the VAT monthly and only be able to reclaim quarterly. For others it will mean an effective increase in postage costs as VAT will be charged but you may not be able to reclaim the VAT.

5 Responses

  1. Yet another oh so simpe tax/vat process introduced. I thought the government were meant to be making things more simpler for businesses.

    This is just another confusing process to throw into the mix.

  2. erm..what?!? So if I understand this correctly, if the wind is blowing east whilst raining in edinburgh I can claim the Vat on some of the services so long as there is two vowels in the day of the week…

    …Surely the person that came up with this has been shot.

  3. Many years ago when VAT was first introduced it was so simple. Indeed so simple that even I could understand it. At the time one of the jobs I was responsible for in the Company that I then worked for was VAT Education. I had to go round our various branches and explain how VAT worked. I could do it then-Not certain that I could do it now. Just in case anybody does not believe me when I talk about “The Good Old Days”.

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