HMRC updates guidance on VAT treatment of direct mail

The move comes after months of pressure on the revenue from the Charity Tax Group and the Direct Marketing Association

HM Revenue & Customs
HM Revenue & Customs

HM Revenue & Customs has published updated versions of its guidance on the VAT treatment of direct mail after being subjected to months of pressure from the Charity Tax Group.

Last year the CTG and the Direct Marketing Association asked for "urgent assurances" on both the future VAT treatment of bulk mailings and the possibility that HMRC would bill charities retrospectively, something the CTG said might have cost some charities hundreds of thousands of pounds.

In December 2014, HMRC said it "accepted that guidance on the treatment of direct mail could be improved" and it would give charities and suppliers until 1 April 2015 to apply the correct treatmentk. But it did not say when new guidance would be published. When this was not published by 31 March this year, the CTG urged HMRC to delay implementation of the rules.

Updated versions of VAT Notice: 701/10 zero-rating of books and other forms of printed matter and VAT Notice 700/24: postage and delivery charges were published yesterday on the HMRC website.

Notice 701/10 outlines the so-called "package test", which describes which items sent out in direct-mail packages attract VAT and includes specific provisions for charities.

Notice 700/24 says that where a company supplies a charity with services such as data handling or the posting of direct mail and printing, that counts as a supply of direct-marketing services and the whole thing is liable for VAT. However, if the services are provided under separate contracts, some might not attract VAT.

But the CTG said it was able to persuade HMRC that some alterations to customer address lists carried out by mail suppliers – such as removing the names of recipients who had died, moved away or asked to be taken off lists – should not attract VAT.

According to the CTG, HMRC will enforce these new guidelines only after 31 July, although it is understood that HMRC’s official position is that it would like charities and suppliers to comply immediately.

John Hemming, chair of the CTG, said: "We are pleased that several of our technical concerns about the VAT treatment of direct mail from 1 August 2015 onwards, after the end of the transitional period, have now been met.

"There remain several outstanding issues relating to the exact scope of the retrospection concession, which will have important financial implications for charities; but, after a recent meeting with senior HMRC officials, we are hopeful for a favourable response shortly."

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