The Charity Tax Group has written to HM Revenue & Customs and the Treasury asking for "urgent assurances" that charities will not be hit with retrospective VAT charges on bulk mailings.
The CTG's move comes after concerns were raised in another letter, sent by HMRC to the Direct Marketing Association in July, which said that advertising mail suppliers could no longer combine postage costs with production costs as a way to cut out VAT liabilities for charities. This has been common practice since 2012, when bulk mail stopped being exempt from VAT.
This could result in charities being liable for an average of 20p more for each letter they sent out, with the potential for those charges to be backdated, the DMA warned.
Mike Lordan, chief executive of the DMA, said at the time that many businesses could be sitting on a "huge VAT timebomb".
John Hemming, chair of the CTG, says in his organisation's letter that he is confident HMRC would be challenged in the First-tier Tribunal if it did change its position to that effect.
He says HMRC’s advice to the DMA "contradicts what charities regard as the accepted interpretation of the existing VAT rules".
Hemming says: "Clarity is urgently required in order to remove the uncertainty that charities are facing. Most importantly, we seek urgent assurances that no retrospective claims will be made against charities."
The letter says that Hemming knows of one charity that estimates it could face a VAT charge of up to £700,000 if HMRC enforced charges backdated to 2012.
Hemming says that the CTG hopes to be able to discuss the matter with HMRC before it publishes new guidance on the matter later in the year, as promised in the department's letter to the DMA.