Following the recent updates to HMRC VAT Notices 701/10 (zero-rating of books and other forms of printed matter) and 700/24 (postage and delivery charges), and the ongoing consultations between HMRC with the Charity Tax Group (CTG) and Direct Marketing Association, HMRC has now published Revenue and Customs Brief 10, 2015 (VAT – direct marketing services using printed matter). This provides clear HMRC guidance, which should be practical and workable for charities and should enable certainty both for the VAT position before 31 July 2015, as well as going forward.
HMRC consider that single source arrangements for the print and distribution of charity mail packs should be treated as a standard rated supply of direct marketing services, rather than a single composite supply of zero rated delivered goods.
However, the brief outlines HMRC’s approach to supplies of direct marketing that have been wrongly treated as zero-rated supplies of delivered goods. In particular, it details the circumstances where HMRC will not take action to assess for past errors made during the retrospective concessionary transitional period (for addressed or unaddressed mail) which is due to end on 31 July 2015. It also makes clear that a requirement of these ‘transitional arrangements’ is for the supplier to notify HMRC that they intend to adopt these transitional arrangements by 30 November 2015.
The brief confirms that the transitional arrangements will now apply to door drops where it can be demonstrated that the supplier’s service consisted only of the printing and delivery of zero-rated printed matter and the customer has instructed the supplier as to the timing and location of the deliveries. It also makes clear that the inclusion of certain alterations to the customer address lists (known as ‘suppressions’ for those gone away, deceased and Mail Preference subscribers) is ancillary to the zero rated supply of printed goods, both for the past and the future.
For businesses whose supplies of direct marketing prior to 1 August 2015 fall outside of the scope of the transitional arrangements (i.e. for printed matter supplied with other services), the brief describes the process available for settlement of outstanding VAT liabilities, with the same notification deadline of 30 November 2015. Failure to ‘claim’ this settlement will result in HMRC imposing VAT on the entire supply on a composite supply basis, which is likely to increase the liability being passed to the charity under the contracts.
It is important that charities and print companies understand the full scope of HMRC’s transitional arrangements, the time limits for claiming the retrospective concessions/settlements, and that they take the appropriate action by HMRC’s deadlines where required.
The CTG has produced a standard letter for charities to send to their print company to protect their own position in this regard. The letter may also be adapted to apply to settlements available in cases which fall outside of the transitional relief arrangements. If you are a member of the CTG access to the letter can be found on their website
If you would like to discuss the implications of the above in further detail, please contact our VAT team