|HMRC Reference:Notice 700/24 (April 2003)||View Change History|
This notice cancels and replaces Notice 700/24 (June 1994). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
Further help and advice
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700 The VAT Guide
727/3 Retail Schemes: How to work the Point of Sale Scheme
727/4 Retail Schemes: How to work the Apportionment Schemes
727/5 Retail Schemes: How to work the Direct Calculation Scheme
741 Place of Supply of Services
744B Freight Transport and Associated Services
This notice explains how VAT applies to charges made for postage and delivery services.
The notice has been restructured and rewritten to improve readability. It contains some minor content changes from the June 1994 edition.
Paragraph 2.3 of the section on delivered goods takes into account the recent House of Lords decision in the case of Plantiflor Ltd. Paragraph 3.2 of the section on direct mailing services includes a further condition which must be met before postal charges can be treated as a disbursement. Section 4, which covers international deliveries, has also been updated.
You can access details of any changes to this notice since April 2003 either on our Internet website at www.hmce.gov.uk or by telephoning the National Advice Service on 0300 200 3700.
This notice and others mentioned are available both on paper and on our website.
You should read this notice if you:
Postal services provided by the Post Office are exempt from VAT, but this exemption does not extend to similar services provided by other suppliers, even where this might be seen as being in direct competition with the Post Office. However, if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps.
A supply of goods may involve delivery to the customer. The way any delivery charge is treated for VAT purposes depends on the circumstances in which the goods are supplied.
If delivery is free, or the cost is built into the normal price, VAT is accounted for on the goods in the normal way based on the liability of the goods themselves. This applies whether or not delivery is required under the contract.
The important test is whether delivery is included in the contract. You are making a single supply of delivered goods if, under the contract, you have to deliver the goods to a place specified by the customer. This might include the customer’s:
The position is not affected by whether the charge you make for delivery is separately itemised or invoiced to the customer. In either case there is a single supply for which the VAT liability is based on the liability of the goods being delivered. For example, any element of the price attributed to the doorstep delivery of milk and newspapers will also be zero rated. On the other hand any element attributed to the delivery of standard rated mail order goods will be standard rated.
Delivery services are normally treated as a separate supply of services only where you:
In this case the liability of the delivery charge is not affected by the liability of the goods you are delivering and is normally standard rated - but see section 4 if the delivery is to, or from, a place outside the United Kingdom. For example, in distributing a publisher’s newspapers (which are zero rated) you are nevertheless making a standard rated supply of services. Similarly, if you deliver the goods by post, the supply of delivery services remains taxable even though the supply to you by the Post Office will be exempt (see paragraph 1.4).
If you supply a separate packing service this will be standard rated within the United Kingdom, but see paragraph 4.4 if the supply is connected with a movement of goods to, or from, the United Kingdom.
If you are a retailer and are involved in the supply of either delivered goods or you charge for delivery, the treatment of the charge will depend on the type of scheme used.
If you use …
then please follow the guidance in …
the Point of Sale Scheme,
Notice 727/3 Retail Schemes: How to work the Point of Sale Scheme.
an Apportionment Scheme,
Notice 727/4 Retail Schemes: How to work the Apportionment Schemes.
a Direct Calculation Scheme,
Notice 727/5 Retail Schemes: How to work the Direct Calculation Scheme.
This covers the service of posting your client’s mail, for example publicity or advertising material or promotional goods.
In this section references to “Royal Mail” include other operators licensed by Postcomm. In these circumstances you can treat Royal Mail charges as a disbursement for VAT purposes provided the following conditions are all met:
All these conditions must be satisfied before you can treat a payment as a disbursement for VAT purposes.
Disbursements are fully covered in Notice 700 The VAT Guide (see paragraph 3.2). However, this section includes details of the general conditions that must be met before direct mailing charges can be treated as a disbursement. These requirements are:
If any of these conditions are not met you will be unable to treat postal charges as a disbursement. In that case they become part of your charge for the supply of direct mailing services to your customer and therefore liable to VAT. They will normally be standard rated, but see section 4 if your supply of direct mailing is to, or from, a place outside the United Kingdom.
Freepost is an arrangement whereby the recipient (ie the advertiser) of a returned mailshot pays the postage costs on behalf of the sender (eg a member of the public); commonly a PO box number will also be used. The supply by Royal Mail of the Freepost and PO Box licences, plus any handling service for which an additional fee is charged, is made to the licence holder. This may be the recipient (advertiser) or an agent handling the mail on the recipient’s behalf. However, the supply of postage is made to the sender of the mail, although the recipient (advertiser) or the agent meets the cost.
This means that where an agent is employed to handle the Freepost:
You are making a supply of freight transport services.
If you transport goods to or from …
then you are making a supply of …
another Member State
intra-EU freight transport.
a place outside the EU
international freight transport.
You will find further information on how these supplies should be treated for VAT purposes in Notice 744B Freight transport and associated services.
This is also covered in Notice 744B Freight transport and associated services.
Depending on the contractual terms with your customer, you will probably be making a supply of an ancillary transport service. You can find further information on this in Notice 744B Freight transport and associated services.
We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:
HM Customs & Excise
Supply of Services Team
4th Floor East
New King’s Beam House
22 Upper Ground
Please note this address is not for general enquiries. You should ring our National Advice Service about those.
If you have a complaint please try to resolve it on the spot with our officer. If you are unable to do so, or have a suggestion about how we can improve our service, you should contact one of our Regional Complaints Units. You will find the telephone number under ‘Customs and Excise - complaints and suggestions’ in your local telephone book. Ask for a copy of our code of practice ‘Complaints and putting things right’ (Notice 1000). You will find further information on our website at http://www.hmce.gov.uk.
If we are unable to resolve your complaint to your satisfaction you can ask the Adjudicator to look into it. The Adjudicator, whose services are free, is a fair and unbiased referee whose recommendations are independent of Customs and Excise.
You can contact the Adjudicator at:
The Adjudicator's Office
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