VAT on postage (again!)

[goldgb]

Hi All
Appreciate there are a few threads on this thorny subject - but this is from a slightly different angle.

We use a printer who prints various items for us and also acts as the mailing house - they post the items for us on their Royal Mail postage account (we give them the addreses) . When we receive their invoices they charge us vat on the postage element at the standard rate - is this correct? I have read the vat guidance on it but it is a bit grey regarding disbursements - has anyone any experience or previous rulings on this.

Tks for your guidance.

Brian

 

[Paul Kelly ICHYB]

In its basic form, if you buy post from RM, there is no VAT. If you sell it on, VAT is chargeable.

 

[Chippie]

Hi Brian,

There is no VAT on postal charges. We use a mailing house to send mailshots out for us. Only 3000-5000 latters at a time but it's more efficient than trying to do it ourselves. We do not and never have paid VAT on the postal element of the work. VAT is charged on the printing of theletters and on the insertion charges but not on the postage. This should be shown on the invoice as a separate zero rated item. HTH

 

[David Griffiths]

Chippie is right. In this case the mailing house is acting as your agent in relation to the postal costs, which are paid as a disbursement. If they invoice you with the exact amount of the postage that they have paid, which I expect would be the case, then it is zero rated.

 

[goldgb]

Here we go again - Thanks for your instant replies chaps - it seems a bit of a grey area - I contacted a few mailing house and it was 50/50 between whether they would charge vat or not. Needs a concrete definate ruling me thinks !!!! - thanks again.

 

[Paul Kelly ICHYB]

I believe the issue lies around whether there is any labour involved, which changes the parameters!

quote:
Postal services provided by the Post Office are exempt from VAT, but this exemption does not extend to similar services provided by other suppliers, even where this might be seen as being in direct competition with the Post Office. However, if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps.

Look here for definitive info.

 

[deniser]

I also think that what you are paying VAT on is the service provided in posting the goods all as one contract so VAT is payable on the whole lot. If you ring the Inland Revenue they will explain it to you in detail.

 

[goldgb]

Chippie - could you get your printer to explain their position to you (you could be doing them a favour) - they might be building up a lot of trouble for themselves if they are not charging it and they should be?

 

[Chippie]

Customs and excise rules state:

Postal services provided by the Post Office are exempt from VAT, but this exemption does not extend to similar services provided by other suppliers, even where this might be seen as being in direct competition with the Post Office.

Other suppliers in this case refers other carriers such as TNT, Parcel Force etc, not mailing houses using RM. Neither do they literally "buy stamps from the PO". I suggest you speak to the accountant at the mailing house rather than your salesman and they should have a handle on it.

However, if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps.

This means that if you invoice your customers for items including P+P then you may have to charge them VAT if it is an all inclusive price. However, if the postage is itemised separately on the invoice it can be zero rated!

As I say I have never been charged VAT on postage by any mail house/direct mail company. Are you VAT registered Brian? If not then find a mail house who will not charge you and use them, I would! Those that are saying they would charge you are probably misinterpreting the rules.

 

[carmenes]

For those that use mailing houses, how much do you get charged per item?

I am interested in doing some mail shots to promote my telecoms business, but the costs seem prohibitive.

 

[Chippie]

Chippie - could you get your printer to explain their position to you (you could be doing them a favour) - they might be building up a lot of trouble for themselves if they are not charging it and they should be?

My printer has explained this to me and so have 3 or 4 other mail houses we have used in the past. What I have explained above is what all of them have explained to me and I can't see that the would all be incorrect. I have no real reason to question them further therefore.

 

[goldgb]

I pay about £38 per 1000 - for that they insert my flyer, address the envelope and insert. (Envelopes and postage (and vat!!) extra) Thats with Postforce in West Sussex but I guess prices are similar through the country.

 

[Chippie]

For those that use mailing houses, how much do you get charged per item?

I am interested in doing some mail shots to promote my telecoms business, but the costs seem prohibitive.

Depends how you do it. We supply the verified customer data base, our own letterheads for overprinting and our own envelopes as they are cheaper for us to buy them independantly. This way the whole process is very cost effective as we don't have to spend money on inserting letters, franking/sticking stamps, replacing many printer cartridges etc etc. We also have a very localised database so use of mail sort helps keep the cost down. It's best to send a list of your own requirements to a few mail houses and see what comes back.

 

[carmenes]

Thanks both - am tempted to use Viapost (I started another thread on this) as they'll charge only 27p + VAT to send out an A4 flyer which includes everything. What do you reckon?

 

[Chippie]

As coincidence would have it I had a meeting scheduled with my accountant this morning and I asked him the question about VAT on postage. His response was:

There are a few cases going through the courts on exactly this problem at the moment, some quite large cases. Basically if you buy a product from a supplier and they post it to you, the postage is only a small part of the overall transaction and is therefore zero rated. However, if the postage forms a considerable part of the business transaction, as would obviously be the case with mail shots through a mail house, then the whole service would form one transaction and the postage would therefore be VAT rated.

However, quite where the line is drawn whereby postage becomes a "considerable" part of the job seems unclear. He did say however that if you find a mail house that don't charge VAT then if there are any problems it is clearly on their heads not yours. It's up to them to charge the correct VAT and not you. So, take advantage of any benefits whilst you can, I have a feeling that when these cases have gone through the courts, the picture may be defined more clearly by HMCE.

We also had a conversation about another scenario as I had heard that if the goods supplied are liable for VAT, then ANY postage or delivery charge is liable for VAT at the same rate, even if the cost of stamps from the Post Office are zero-rated. This could be clouding the issue here because if you print leaflets or flyers to market your own business then these items are VAT exempt and always have been. Therefore I would suggest that posting them out would be too, since they in themselves are "the goods" and are zero rated! Confused? You should be!

 

[goldgb]

Thanks for all your help Chippie - Yep - totally confused. All you have said stacks up and makes sense - but looking through some other forums they come down on the 'charge it' side - as I say it seems 50/50 - and needs some clear guidance from the rev. :|

 

[Postforce]

Don't scream - don't shout - I know vat on postage has been discussed again and again - (with varying opinions) - just resurecting this thread as it approaches it from a different angle. Has anyone had any recent experiences - or vat inspections - to clarify this minefield. Last July it was mentioned there were some court cases going through which might make it clearer. Namely , if someone is posting for you on their royal mail account - should vat be added? Some people say yes, some no, some that it depends on if the item being mailed is vatable - any new thoughts??

 

[JGOffshore]

I think that the reason why some mailing houses charge VAT and some don't is just that the area is a bit uncertain and they would rather charge VAT than take the risk of having to pay up if HMRC decide that they should have but didn't.

A few years ago the matter of VAT on postage on the supply of books was in the spotlight. I think the final decision was that if the invoices were to show postage as a separate item VAT was charged on the postage even though books are zero rated. However if the invoices showed "postage included" or wasn't mentioned, then even though an amount was built in, the whole invoce was zero rated.

If your mailshots include only zero rated items then perhaps the same rule could/should apply.

Mind you, printing is another area where the decision whether a piece of paper is VAT-able or not also isn't as simple as it at first appears and printers do tend to charge VAT even where they shouldn't just to avoid problems with HMRC.

 

[Rhyl Lightworks]

If you are VAT registered, does it matter?

Barrie

 

[JGOffshore]

If you are VAT registered, does it matter?

Barrie

Apart from any potential cash-flow issues (which would be unlikley at this level I'd have thought) it cleary doesn't. I presume our "poster" is not registered.

 

[Kevin Hall]

Gosh people got confused on this thread, didn't they. There are a few issues becoming conflated, and the actual answer (given very early on by David Griffiths) was unfortunately ignored.

Issue #1:
The question on (nearly) everyone's lips at the moment is whether it is right that everyone else has to charge VAT on delivery packages, whilst the Post Office can continue to charge no VAT on delivering letters. Whatever your views on this subject, I would suggest that this entire debate is largely irrelevant to this thread.

Issue #2:
Multiple supplies or a single supply? A few years ago, this was the question on (nearly) everyone's lips. This has an impact on anyone in the delivery business or who delivers their product.

If you sell goods and deliver them as part of your contract with the customer, then you are probably making one supply of "delivered goods". If so, the price of the overall supply is subject to VAT at the rate determined by the goods.

If you sell goods and then make a separate arrangement with you customer to deliver these goods, then you might be making one supply of goods (subject to VAT at the rate determined by the goods) and one supply of delivery services (subject to VAT at the standard rate, if it all takes place in the UK).

This issue remains less than clear and, even where there is setled caselaw, it can still be very difficult to identify and follow the appropriate rules.

But this also seems not to be the central aspect of this thread.

Issue #3:
Who is the true customer of the Post Office's services? The purchase is of the mailing house service, which involves putting letters in envelopes, addressing them, stamping them up and putting them in the post.

Let's take a clearer example. If your business buys the stamps, the envelopes and provides everything to the mailing house, there would be no issue. The stamps would be purchased from the Post Office by the business with no VAT paid. The services would be bought (separately) from the mailing house and VAT would be paid.

Let's a clear counter-example. If your business supplies nothing but the contents to be posted, the mailing house will provide everything else. The cost of the entire mailing house service will be subject to VAT. There will be no separate suply of stamps or envelopes by the mailing house to the business.

Now let's complicate things. Assume the first example occurs, but (as a practical short-cut) the business asks the mailing house to purchase stamps on behalf of the business, for which the business will reimburse the mailing house. This changes nothing in the first example, provided the mailing house satisifes HMRC's list of conditions (e.g. makes a separate charge for the stamps, labels recharge as "disbursement", makes no profit/loss on the recharge).

Now let's turn to the actual scenario. It is clear that the answer will depend on how the mailing house engages with its customers. If it is buying the stamps as agent for its client businesses, the mailing house will simply recharge to each customer the amount it paid on stamps and no VAT will be added. This is because the true customer of the stamps is the client business, not the mailing house.

However, if the mailing house falls within the second example above, promising to do everything and charging one price for it all, then the mailing house absorbs the cost of the stamps as part of its own business activity. The mailing house is the true customer of the stamps. Then VAT is applied to the overall, single price charged for the mailing services.

Conclusion:
I cannot understand why any sensible mailing house would not act as an agent for all its customers in buying the stamps from the Post Office. As one contributor noted, perhaps it is because they (and their accountants) and uncertain on this issue.

It therefore seems sensible to ring round and identify the mailing houses who do not charge VAT on the stamps, and all other things being equal (e.g. provided price and quality of the main service are the same as their cometitors) use them, as they will be cheaper overall.

I realise this is a long one, but hopefully it is relatively clear?

 

[photo1]

Sorry Everyone, have just just joined so if this question has been answered before I apologise.

I have just ordered a photograph to be printed. I have paid VAT on the printing. The postage is, in my opinion high, but anyway, they have charged me VAT on postage.

Can they do this?

(I am not VAT registered)

Photo1

 

[steve23]

I think given Kevins answer above they are allowed to charge VAT.

Only if you had engaged them in a seperate contract covering supply would that not be the case.

Handy that you did resurect this thread, as gave me a chance to thank kevin for his superb answer.

All the best

Steve