Information on VAT and postal services

Changes to VAT law and the way in which our services are regulated have affected the VAT status of a number of our products.  A limited range of our services became subject to VAT through 2011, and this will extend to all bulk mail services from April 2012.  A summary of the main services affected is shown later on this page. 

Universal services (USO) such as 1st and 2nd Class stamps will continue to be VAT exempt from April 2012. 

For more information on all Royal Mail prices visit: www.royalmail.com/prices2011.

The following table shows a full list of services that are changing their VAT status.

Further Information

* We have put in a notification to the Regulator for a new payment channel for our USO 1st and 2nd class mail via account. Like the other payment channels of stamps, online & meters, we would not offer any discounts for volume or presentation and it will remain VAT exempt. We will provide further details when available

 Many business customers can reclaim VAT.  If your business is registered for VAT, and sells taxable goods or services, then as a general rule, you will be able to recover the VAT in the normal way on your VAT return.

For professional advice, talk to your Finance department, Accountant or Tax Advisor. You can also find more information on VAT at the HMRC website: www.hmrc.gov.uk/vat (new window).

 Summary

Royal Mail services that are or will become liable to VAT:

 Express and Packet services

 UK Services

• Big Book
• Royal Mail Heavyweight
• Mailmedia®
• Door to Door

 Business Mail and Publishing

• Mailsort® (70, 120, 700 and 1400)
• Walksort®
• Pressstream®
• Sustainable® Mail
• Advertising Mail (70,120, and 1400)
• Response Services (inc. Licence fees)

 International Services (VAT will only be added to EU destinations)

• International Contract Services
• International Airsure®
• International Admail and Admail Packets
• International Redirections

 Inbound Mail Services

• Timed Delivery
• Early Extraction™
• Early Collect™
• Selectapost™
• Local Collect

 Other Services

• Business Mail Secure
• Admail
• Callers Services
• Rural Deliveries
• Rural Carriage of Goods
• PO Box Services
• Redirect Diversion
• Ministerial Pouch services
• Do not redirect

 Contract Services

• Pre-Sorted Delivery
• Mailroom Management
• Mailroom Consulting Services
• Royal Mail Relay®

 Some services that remain exempt from VAT, in addition to free services

 UK Services

• First and Second Class (Stamped, Franked)
• Special Delivery™ Next Day (Stamped and Franked)
• Standard parcels
• Recorded Signed For™ (if purchased with an exempt service)
• Keepsafe™

 International Services

• International Airmail
• International Surface Mail
• International Signed For™
• All HM Forces Mail (BFPO)

 Frequently Asked Questions

Why is VAT now being charged on some postal services?

Why are more services becoming liable to VAT from 2nd April 2012?

What changes occurred in August 2011?

Which services are subject to VAT?

Will there be price rises on 2nd April 2012?

Is VAT payable on stamps?

What is happening to franking machines?

Does Royal Mail issue VAT invoices?

Can I reclaim the VAT I pay on postal services?

Can I use Online Postage to purchase services liable to VAT?

1. Why is VAT now being charged on some postal services?

   For many years, postal services have been exempt from VAT.

   A court case has led to a change in the rules about VAT on postal services throughout the European Union. By law, we had to start charging VAT at the Standard Rate (20% for UK customers) on some postal services within the European Union (EU), including within the UK, from 31st January 2011.

   The change only affects some Royal Mail services. Some of our services are part of the Universal Service Obligation (USO) or are subject to price control by our Regulator, and it has been agreed with HMRC that such services are not subject to VAT. However any services which are not part of the USO, or not price controlled are now liable to VAT at the standard rate. 

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2. Why are more services becoming liable to VAT from 2nd April 2012?

   HMRC guidelines show that generally Royal Mail services that are not part of the Universal Service Obligation (USO) or price control will become liable to VAT.  Our Regulator issued a new USO on 1st August and proposed price control from 2nd April 2012 which identified more Royal Mail services moving out of these areas.

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3. Is VAT payable on stamps?

   You won't pay VAT when you buy stamps and most services you post using stamps won't be affected by VAT.
   
   For example, there's no VAT to pay when you use stamps on First and Second Class mail, our Special Delivery™ Next Day without additional enhancements, Recorded Signed For™, International Airmail and Surface Mail, International Signed For™ and Standard Parcels.

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4. Which services are subject to VAT?

   From 31st January 2011:

   The more popular services which are liable to VAT are:

   • Business Collections
   • Special Delivery™ Next Day (on account only)
   • Door to Door
   • Special Delivery™ 9.00a.m.
   • Timed Delivery
   • Royal Mail Tracked® and Tracked™ Next Day
   • International Airsure® (to EU countries)

   International contract services to EU countries are also liable to VAT from 31st January 2011. For further information visit: www.royalmail.com/int2011
   
   We also have to charge VAT on services provided under individually negotiated business contracts with customers. This does not include standard discounts which are available to all qualifying customers.

   From 1st August 2011:
   Packets sent via our bulk account services which weigh more than 1kg will become liable for VAT at the standard rate. The services affected are:

   • Mailsort 3 1400
   • Presstream 1 & 2
   • Packetpost 1 & 2
   • Packetsort 1 & 2

   Letters and large letters for these services are unaffected. Recorded Signed For will also become subject to VAT if purchased as an add-on to Packetpost or Packetsort packets weighing >1kg (from 1st August 2011). In all other circumstances it will remain VAT exempt.

   From 6th December 2011:
   Packets sent via our bulk account services which weigh more than 1kg will become liable for VAT at the standard rate. Letters and large letters for these services are unaffected. The services affected are:

   • Mailsort 1 1400
   • Mailsort 2 1400

   From 2nd April 2012

   • Mailsort 3 1400
   • Presstream 1 & 2
   • Packetpost 1 & 2
   • Packetsort 1 & 2
   • Mailsort 1 1400
   • Mailsort 2 1400
   • Cleanmail®, Cleanmail® Plus, Cleanmail® Advance
   • Mailsort® (70, 120, 700 and 1400)
   • Advertising Mail (70, 120, and 1400)
   • Walksort®
   • Presstream®
   • Sustainable® Mail
   • Packetpost
   • Packetsort
   • Packetsort Plus
   • Packetpost Returns
   • PO Box Services
   • Automated Standard Tariff Large Letter
   • First and Second Class Standard Tariff account mail
   • Response Services (inc licence fees)
   • Redirect Diversion
   • Ministerial Pouch service
   • Do not redirect

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5. Will there be price rises on 6th December 2011 when VAT is introduced on additional services?

   Royal Mail is looking to increase its prices from April 2012 but has not fixed a date

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6. Is VAT payable on stamps?

   You won't pay VAT when you buy stamps and most services you post using stamps won't be affected by VAT.
   
   For example, there's no VAT to pay when you use stamps on First and Second Class mail, our Special Delivery™ Next Day without additional enhancements, Recorded Signed For™, International Airmail and Surface Mail, International Signed For™ and Standard Parcels.

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7. What is happening to franking machines?

   If you have a "smart" franking machine which can handle VAT, you’ll be fine. Speak to your franking supplier to find out more.
   
   You can also still use any franking machine to buy all the Royal Mail services which aren't affected by VAT, like First and Second Class, Special Delivery™ Next Day, International Airmail and International Signed For™.
   
   You will need a "smart" franking machine which can handle VAT if you want to buy any of the services affected by VAT. The well-known services affected which are available on franking machines are Special Delivery™ 9.00am and Airsure®, and Single Business Collections.
   
   For more information about franking, visit: www.royalmail.com/franking

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8. Does Royal Mail issue VAT invoices?

   The invoices we issue to business customers, for example for purchases on account, using our Online Business Account (OBA) or Posting Cheques, will be VAT invoices which show the amount of VAT.
   
   If you are posting at a Post Office® branch, the receipt you receive will be a VAT receipt.
   
   You will receive a VAT invoice for taxable services franked on a Smart franking machine.
   
   Our Mail Centre counters and Delivery Offices will not issue VAT receipts.

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9. Can I reclaim the VAT I pay on postal services?

   Many business customers can reclaim VAT, but we do appreciate that some cannot.
   If your business is registered for VAT, and sells taxable goods or services, then as a general rule, you will be able to recover the VAT in the normal way on your VAT return.
   
   You should keep your VAT invoice or receipt as evidence.
   
   Business customers who are not VAT registered or do not sell taxable goods or services can't reclaim the VAT on their business purchases and expenses.
   
   For professional advice, talk to your Finance department, Accountant or Tax Advisor. You can also find more information on VAT at the HMRC website: www.hmrc.gov.uk/vat (new window).

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10.   Can I use Online Postage to purchase services liable to VAT?

    You will not be able to buy affected services on SmartStamp® and Online Postage for a while. They will still be available at Post Office® branches and on account.

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