Charging VAT on Royal Mail Postage?

[mconridge]

Hi Guys,

We have now registered for VAT.

We send alot through The Royal Mail. Do we have to charge VAT on the price we charge our customers for this service?

For example, if we charge £4.00 for delivery do we now have to charge £4.70?

:|

 

[3pic]

Postage when supplied by the Royal Mail is exempt from VAT.

Postage when supplied by anyone else is usually standard-rated or zero-rated. Let me explain.

If the contract is to supply and deliver an item, the postage rate normally follows that of the supply you are making, so if you are sending out books/printed materials - these are zero rated supplies - so your postage charge on top will be zero rated. If you are posting out a DVD or whatever else, then your postage charge will be standard-rated.

If the delivery cost is an additional element to the supply then it will be standard-rated regardless of what is being sent.

But it will never be an exempt supply unless you are the Royal Mail itself.

Have a look at this Notice 700/24 (link) : http://customs.hmrc.gov.uk/channels...ntent&id=HMCE_CL_000114&propertyType=document

In answer to your example, if you are charging £4.00 for delivery then you would need to add VAT onto that £4.00 (£4.70)

 

[MikeH]

Totally agree with the above post. Do not miss VAT off your delivery charge or HMRC will have great pleasure making you pay for it.

This is a common misunderstanding that postage is exempt. It is not. It is a fee charged as part of your service and as such is not exempt.

Mike.

 

[mconridge]

Thanks for that guys. Totally cleared it up.

 

[Strath]

Reminds me of my first VAT return many years ago, i claimed for VAT on postage for about 80p and the VAT fella was not too happy when he checked my invoices. Everything balanced apart from those stamps...

 

[MacAddict]

Is it possible to pay the vat part on this example (70p) and reclaim it ?. This way the customer gets a cheaper delivery charge

 

[3pic]

The 70p VAT is to be paid over to HMRC - whether the customer or the supplier pays it, HMRC doesn't care.

But the 70p is output tax (ie, the output of your business is your sales and so output tax is a tax on your sales).

You cannot recover output tax, it is going OUT of you and IN to HMRC.

You can only recover Input Tax (ie, the input to your business is the costs it incurs in existing). As Royal Mail don't charge for stamps/postage then there is no Input tax associated with the transaction to recover.

Sorry about that, but the VAT has got to be charged.