A recent letter from the Direct Marketing Association to HMRC means potential increase in costs for charities.
Many charities pay a single supplier to provide production and postage/delivery of marketing materials and HMRC has historically agreed that this supply is zero rated for VAT purposes.
In a recent letter sent by HMRC to the Direct Marketing Association, it was suggested that the service – both production and postage – should be standard rated. This would increase the cost of sending promotional material to supporters by 20%, and could cost the charity sector millions of pounds.
Following discussions with the Direct Marketing Association, we have written to HMRC and HM Treasury officials expressing concern about this apparent change on the VAT treatment of bulk mailing arrangements. HMRC appear to be adopting a new policy that a postal element in a supply of printed matter will always change the nature of bulk mailing arrangements. This seems to be based on an argument that the postal element has a relatively high value and it is seen as essential to the overall aim of the contract.
Moore Stephens has called for close engagement with the charity sector before the promised HMRC guidance is implemented and have requested a meeting with officials to discuss their concerns. We asked that no retrospective claims be made against charities. While we cannot advise charities how to manage their VAT treatment of their bulk mailing arrangements until HMRC officially notifies the sector of a change to its guidance, it would seem appropriate to continue to work within the existing rules.
Related linksCharities & not-for-profit