Royal Mail users urged to use VAT reclaim

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Businesses including mail order companies and internet retailers could be eligible for a VAT reclaim on certain parcel services going back four years.

It was announced in the Budget that parcel deliveries of this kind would be subject to VAT from 31 January 2011, but a European Court of Justice decision has paved the way for retrospective claims.

Any business with individually negotiated arrangements with the Royal Mail covering mailing services including Parcelforce could be in line for a VAT pay-back, but those involved in large scale mailings will have the most to gain, said tax experts at Smith & Williamson.

"I believe there could be thousands of businesses up and down the country, both large and small, which could benefit," said Hannah Dobson, VAT director at the firm.
In an briefing last month, HMRevenue & Customs confirmed that the exemption would be removed from next year, but did confirm that backdated claims would be considered.

"To maximise their claim, organisations should lodge their request as soon as possible. Retrospective VAT claims are capped at four years, so every day of delay reduces the potential reimbursement. Typically, organisations which have individual contracts with HMRC may be able to recover up to 7/47 of the gross cost of those services,” Dobson added.

HMRC said in the briefing: "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 the ECJ case 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."