I think I’d better nip this one in the bud before any conspiracy nuts latch on to it…

VAT on Royal Mail services in 2011?

Here’s a curious thing, buried in the back of the Budget document it says;

“VAT and postal A.96 – From 31 January 2011 VAT will be applied at the standard rate to certain postal services provided by the universal service provider (Royal Mail).”

Did the price of stamps and other stuff in the future just go up by 17.5% or more?

So much for his comment of “I have no further announcements on VAT”

NOTE: Currently Royal Mail services are zero-rated and exempt from VAT.

Google is your friend as a quick search turns up this report from last November…

Royal Mail is facing another serious threat to its efforts to compete with private-sector rivals, just weeks after trades unions agreed to call a halt to a debilitating series of strikes during negotiations with the company.

The postal operator has been told by HM Revenue & Customs (HMRC) that it will soon be forced to begin charging valued added tax (VAT) for many of its services, having previously been exempt. At a stroke, that would add 17.5 per cent to the prices it charges businesses, rendering it at a serious competitive disadvantage.

HMRC’s ruling follows a judgment in the European Court of Justice (ECJ) in a case brought by TNT Post, one of Royal Mail’s fiercest competitors in the UK. Under European Union law, publicly owned postal operators are exempt from having to charge VAT on their services and Royal Mail has always been able to enjoy this protection.

However, last month, TNT successfully challenged Royal Mail’s exemption, on the grounds that it should not apply on commercial contracts subject to a competitive tendering process. The ECJ ruling means that in most cases where Royal Mail pitches for work with business customers – the most crucial part of its market – it will now have to begin charging VAT, as all of its private-sector rivals already do.

So, no – the price of stamps won’t be going up and as technical change resulting from an legal ruling on the correct interpretation of existing law, its not something that would announced in the main Budget Speech.

Reader comments

1. Unity

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