Direct mail remains VAT-free

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Royal Mail's direct mail services will still be exempt from VAT despite the recent removal of exempt status for most of its services.

A ruling by the European Court of Justice (ECJ) stipulates that Royal Mail must charge VAT on many of its services to maintain market competition, but this will not apply to direct mail because its delivery is price-controlled and subject to regulation, reports Marketing Direct.

The decision means B2B offline marketers will still be able to benefit from VAT-free direct mail services.

Mailsorts one, two and three are price-controlled and therefore will not be subject to the ECJ ruling.

Royal Mail was informed of the loss of its VAT-exempt status by HM Revenue & Customs following the ECJ case which was brought by TNT Post.

Other postal services providers in the UK including UK Mail, DHL and TNT Post currently have to charge VAT at the standard rate, which is due to increase on January 1st 2010.