Postage and delivery charges

HMRC Reference:Notice 700/24 (April 2003) View Change History
 

Contents

Foreword

Other notices on this or related subjects

1. Introduction

1.1 What is this notice about?

1.2 What’s changed?

1.3 Who should read this notice?

1.4 Aren’t postal charges exempt from VAT?

2. Delivered goods

2.1 How do I work out the VAT treatment for delivered goods?

2.2 What if I deliver goods to my customers but make no additional charge?

2.3 What if I have to deliver the goods and I make a charge for this?

2.4 What if delivery is not required under the contract or I deliver somebody else’s goods?

2.5 How do I treat a separate charge for packing?

2.6 What if I am a retailer using a retail scheme?

3. Direct mailing and Freepost services

3.1 What is meant by direct mailing services?

3.2 Can I treat the postal charges as disbursements?

3.3 What are disbursements?

3.4 What if I don’t meet the conditions?

3.5 Freepost

4. Goods delivered to or from the United Kingdom

4.1 What if I deliver somebody else’s goods, including mail and documents?

4.2 What happens if I transport goods to or from a place outside the UK?

4.3 What happens if I supply only the UK leg of an international freight movement?

4.4 What if I supply a separate packing service in connection with a movement of goods?

Do you have any comments?

 

Foreword

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

If you need general advice or more copies of Customs and Excise notices, please ring the National Advice Service on 0300 200 3700. You can call between 8.00 am and 8.00 pm, Monday to Friday.

If you have hearing difficulties, please ring the Textphone service on 0300 200 3719.

If you would like to speak to someone in Welsh, please ring 0300 200 3705, between 8.00 am and 6.00 pm, Monday to Friday.

All calls are charged at the local rate within the UK. Charges may differ for mobile phones.

Other notices on this or related subjects

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

1. Introduction

1.1 What is this notice about?

This notice explains how VAT applies to charges made for postage and delivery services.

1.2 What’s changed?

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.

1.3 Who should read this notice?

You should read this notice if you:

  • supply goods which you deliver to your customer;
  • provide a delivery service involving other people’s goods; or
  • operate a direct mailing service.

1.4 Aren’t postal charges exempt from VAT?

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.

2. Delivered goods

2.1 How do I work out the VAT treatment for delivered goods?

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.

2.2 What if I deliver goods to my customers but make no additional charge?

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.

2.3 What if I have to deliver the goods and I make a charge for this?

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:

  • own address;
  • friends or relatives; or
  • their own customers.

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.

2.4 What if delivery is not required under the contract or I deliver somebody else’s goods?

Delivery services are normally treated as a separate supply of services only where you:

  • supply goods under a contract that does not require delivery but where, nevertheless, you agree to deliver the goods and make a separate charge; or
  • you provide a service of delivering somebody else’s goods (see also section 3 for direct mailing services).

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).

2.5 How do I treat a separate charge for packing?

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.

2.6 What if I am a retailer using a retail scheme?

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.


3. Direct mailing and Freepost services

3.1 What is meant by direct mailing services?

This covers the service of posting your client’s mail, for example publicity or advertising material or promotional goods.

3.2 Can I treat the postal charges as disbursements?

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:

  • you meet the general disbursement requirements outlined in the section on “Supplies made by or through agents: other situations” in Notice 700 The VAT Guide;
  • your clients tell you who to send the mail to or have access to the mailing list before the mail is sent out;
  • your responsibility for the mail ceases when it is accepted for safe delivery by Royal Mail; and
  • you pass on any Royal Mail discount or rebate to your clients in full or, if you obtain the discount or rebate from posting various clients’ mail at the same time, you apportion it fairly between them.

All these conditions must be satisfied before you can treat a payment as a disbursement for VAT purposes.

3.3 What are disbursements?

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:

  • you acted as the agent of your client when you paid Royal Mail;
  • your client actually received the services provided by Royal Mail (this condition usually prevents your own costs being treated as disbursements for VAT purposes);
  • your client is responsible for paying Royal Mail;
  • your client has authorised you to make payment on their behalf;
  • your client knew that the services you paid for would be provided by Royal Mail;
  • your outlay will be separately itemised when you invoice your client;
  • you recover only the exact amount which you paid to Royal Mail; and
  • the services which you paid for (ie Royal Mail costs) are clearly additional to the supplies which you make to your client on your own account.

3.4 What if I don’t meet the conditions?

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.

3.5 Freepost

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:

  • any recovery of the postage costs by the agent from the recipient (advertiser) is not liable to VAT; and
  • where the licence is taken out by the agent in the name of the recipient (advertiser) the costs may be disbursed to the recipient, subject to the normal rules referred to above.

4. Goods delivered to or from the United Kingdom

4.1 What if I deliver somebody else’s goods, including mail and documents?

You are making a supply of freight transport services.

4.2 What happens if I transport goods to or from a place outside the UK?

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.

4.3 What happens if I supply only the UK leg of an international freight movement?

This is also covered in Notice 744B Freight transport and associated services.

4.4 What if I supply a separate packing service in connection with a movement of goods?

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.

Do you have any comments?

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
London
SE1 9PJ

Please note this address is not for general enquiries. You should ring our National Advice Service about those.

If you have a complaint or suggestion

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
Haymarket House
28 Haymarket
LONDON
SW1Y 4SP

Phone: (020) 7930 2292
Fax: (020) 7930 2298
E-mail: adjudicators@gtnet.gov.uk
Internet: www.adjudicatorsoffice.gov.uk/

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