Royal Mail registering for VAT

[deniser]

I posted this in general business but got no response so am posting it here. Maybe it belongs in accounts but not sure.

Just wondering whether anyone had any update on Royal Mail registering for VAT. Parcelforce have told me they think it won't happen for a while but
I found something on the internet on an accountant's website which said that VAT would be charged from 31 January 2011 on:

1. all individually negotiated postage rates
2. Parcelforce
3. non addressed mail delivered door to door
4. mailroom services

No VAT will be charged on 1st and 2nd class post or RM standard parcels.

Presumably this means that any business who has a contract with RM has individually negotiated rates and these will be subject to VAT?

This will presumably mean putting up delivery prices or an extra cost to us of 20% of the postage price?

Will this be the final nail in the coffin for Royal Mail as they will then be on a par with or more expensive than courier prices?

Does anyone have any information? Is this really going to happen?

 

[JamieM]

There is a thread about it here:

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=159006

On page 2 I posted a link to the Royal Mail info which should answer your questions.

 

[deniser]

I don't understand that thread.

Surely if one can reclaim the VAT then surely it should also have been charged to our customers and accounted for to IR?

 

[alanc]

Surely if one can reclaim the VAT then surely it should also have been charged to our customers and accounted for to IR?

You should already be charging VAT on P&P to your customers, declaring it and paying it to HMRC.

What has emerged is the ruling that RM should have been charging VAT on individually negotiated postage rates etc. and they haven't been. Accordingly, there has been a VAT element to that charge and those of us that buy postage services direct from RM are entitled to reclaim that VAT element from HMRC (exactly in the same we you reclaim VAT paid to other suppliers).

 

[allsquare]

individually negotiated postage rates

This is the tricky one.....we use PacketPost 1st & 2nd Class Recorded and Special Delivery.

As I understand it, PacketPost is not an "individually negotiated postage rate" but the Special Delivery is. As we use the SG (Saturday Guarantee) service, a rate was negotiated to increase all parcels sent via Special Delivery by so many pence, to cover the Saturday Guarantee items - has anyone else experienced this?

 

[deniser]

You should already be charging VAT on P&P to your customers, declaring it and paying it to HMRC.

Thanks for the clarification of the other thread. Will there be any further implications of RM registering for VAT?

I don't charge VAT on P&P to my customers as the goods I sell are zero rated so my P&P is also zero rated provided I use RM and not a courier service. Where I do sell the odd standard rated item I do have to charge VAT on the postage and apportion it if the parcel contains a mixture.

I am wondering whether the VAT registration of RM going forward will affect my ability to continue not to have to charge VAT on my P&P. I say this because if I did, a courier service would be cheaper, as I already take the VAt into account in the pricing.

 

[JamieM]

Thanks for the clarification of the other thread. Will there be any further implications of RM registering for VAT?

I don't charge VAT on P&P to my customers as the goods I sell are zero rated so my P&P is also zero rated provided I use RM and not a courier service. Where I do sell the odd standard rated item I do have to charge VAT on the postage and apportion it if the parcel contains a mixture.

I am wondering whether the VAT registration of RM going forward will affect my ability to continue not to have to charge VAT on my P&P. I say this because if I did, a courier service would be cheaper, as I already take the VAt into account in the pricing.

I would get advice from your accountant on any changes to VAT handling on zero rated goods but I suspect you will have to charge VAT on the P&P if the RM service is subject to VAT. What services do you use?

 

[Page]

Thanks for the clarification of the other thread. Will there be any further implications of RM registering for VAT?

I don't charge VAT on P&P to my customers as the goods I sell are zero rated so my P&P is also zero rated provided I use RM and not a courier service. Where I do sell the odd standard rated item I do have to charge VAT on the postage and apportion it if the parcel contains a mixture.

I am wondering whether the VAT registration of RM going forward will affect my ability to continue not to have to charge VAT on my P&P. I say this because if I did, a courier service would be cheaper, as I already take the VAt into account in the pricing.

Not my area of expertise but to help with your understanding - you DO or at least should charge VAT just at the zero rate - now that may sound an oxymoron but in the VAT world it is not.