VAT for 1kg Royal Mail parcels starts 1st August 2011

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From the 31st January this year certain Royal Mail services attracted VAT for the first time. The services attracting 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 also attracts VAT. All Parcelforce domestic and EU services also attract VAT.

From the 1st August 2011 parcels weighing more than 1kg, posted using certain Royal Mail bulk account services will attract VAT at the standard rate. The specific services affected are:

Mailsort 3 1400
Presstream 1 & 2
Packetpost 1 & 2
Packetsort 1 & 2

Packetpost and Packetsort

If the Packetpost Daily Rate average weight exceeds 1kg, all packets that day will incur VAT, but if the average weight is 1kg or less then they won’t. Likewise for Packetpost Flat Rate contracts, if the contracted weight is 1kg or less then all packets will be VAT exempt, whereas if the contracted weight exceeds 1kg then all packets will be liable to VAT.

(Note that this refers to sales orders, and not totals for the day. For example, if a customer makes 3 sales orders in one day, say from different parts of the organisation, each will be treated separately for VAT purposes.)

1kg + parcels sent using Royal Mail’s Standard Tariff rates will not be impacted, so no change for 1st class, 2nd class and Standard Parcels services purchased at Post Offices or via Online Postage.

This is going to be interesting to say the least for some retailers. If your items are roughly all the same weight you’ll be largely certain of your VAT position – you’ll either have an average weight above or below the VAT threshold.

What it will introduce is the ability to game the system for retailers who aren’t VAT registered and so can’t reclaim VAT. If your posting profile is generally below 1kg but on a certain day you have a larger than normal quantity of heavier parcels, which would push your average weight for the day over 1kg, it may be in your interest to delay despatch of a couple of parcels until you have enough light items to bring your average back down.

This appears needlessly complicated and in truth gaming the system to avoid VAT doesn’t seem right. I suspect some sellers may even be tempted to post personal letters and Christmas/Birthday cards to bring average weights down.

36 Responses

  1. Looks like they will all be out on strike again soon so it may be academic.

  2. When the Tories were el;ected they tried(Unsuccessfully) to say that they were going to be Business Friendly. Why is it that just about everything that they or their Subsidiaries do is a Dogs Breakfast. This policy on VAT and Postage proves that the Lunatics are certainly in charge.

  3. Chris,

    Im confussed?

    I get the whole Vat thing on above and below, but lets say a bag on parcels cost £10 to send does that mean we pay £10 and claim the 20% of the tenner back or does this mean its a tenner plus 20%?

  4. Chris, It would be £10 plus V.A.T so the price in effect goes up but you can then claim that V.A.T back if your registered.

  5. The Railways are always being critisised because their Fares are so complicvated that nlot even the blokes in the Ticket Offices really understand them. It looks as if the POst Office is trying to make their charges so complicated so nobody will understand theirs either.

  6. I have just spoken to our Royal Mail rep and they were only told this morning!! I thought employment was going to come from small businesses but if the VAT man keeps stealing evermore money less people will be employed!!
    Vince Cable and George Osborne “Leave Business Alone” otherwise we will not be able to help get us out of this recession!

  7. Why do they have to make things so complicated? And how the heck do they expect businesses are going to be happy about this? They said they’d be business-friendly – that was a joke…

  8. Although I don’t like the ConDem government VAT on Royal Mail services is not something you can blame them for. The 2 “culprits” are TNT and the ECJ (European Court of Justice). TNT took a case to the ECJ saying it was unfair to RMs compeititors and the ruling was in their favour.

  9. The only answer is to vote for anyone but the Con/Dem/Lab cartel. Politicians need to learn that they are our servants not our rulers. The ruling cartel only manage to get around 50% of the population to vote for them even with blanket media brainwashing, it is clear they have failed and the public know they have failed.

    Media says we should accept the lesser evil of Con/Dem/Lab, don’t accept any evil. Try this instead, vote for anyone but the incumbent, don’t worry, none of the small parties will ever get enough power to wreak upon us the devastation that the cartel has. Diversity is good, we are ruled by a monoculture, end it.

    Gordon Brown gave 900 billion pounds to the bankers. He borrowed 900 billion pounds from the bankers and gave it to the bankers. The bankers charge interest, you, your children and your grandchildren will be paying off the loan and interest. The bankers committed the offence, predatory lending, they should be prosecuted and the shareholders should carry any loss.

  10. If you have ten thousand regulations, you destroy all respect for the law.” Winston Churchill.

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