An interesting, albeit minor, change to the treatment of postal services was announced towards the end of 2009, although it has not as yet been implemented.
Its effect will be to make certain supplies of services by the Royal Mail subject to the standard rate of VAT.
Apart from the obvious onus on the Royal Mail itself, the change would affect, for example, partly exempt businesses, charities and even individuals where there is no entitlement to input tax deduction.
It is generally understood that throughout the EU ‘public postal services’ are exempt, and in the UK that has historically applied to all services provided by the Royal Mail only, before and after the deregulation of the postal sector in 2006.
Other operators must apply the standard rate to their services.
The forthcoming change follows the ECJ decision, after a legal challenge to the scope of the exemption as applied in the UK by TNT Post UK Ltd.
The decision confirmed two things: that only the Royal Mail provides ‘public postal services’ in the UK for the purposes of the exemption: but also that the exemption does not apply to specific services by the Royal Mail, which are individually negotiated and outside of their normal supplies of public postal services.
Consequently, once the change is introduced, certain services by the Royal Mail, not subject to price or regulatory controls, will become standard rated and will represent an additional cost to those not using such services to make taxable supplies themselves.
HM Revenue and Customs are currently in discussions with the Royal Mail, and, when the relevant services have been identified and agreed, the changes will be applied from a future date.