22 Mar 2007, 00:08
UK Mail has reached an agreement with Royal Mail that will enable it to avoid VAT, The Times reports.
The deal could trigger further business for UK Mail with non-VAT registered groups such as banks and charities.
Royal Mail has always held an advantage over its competitors as it has been exempt from VAT, while its rivals have had to pay the tax. The European Commission is currently investigating the matter.
Under the new deal, UK Mail will be able to to act as an agent for Royal Mail, which will allow it to benefit from Royal Mail's exempt status.
Instead of having to charge its customers VAT on the entire 16p-17p fee per item, UK Mail will only have to charge VAT on the 3p-4p element that represents the collecting and sorting work done by Royal Mail.