Delays to HMRC guidance on VAT and direct mail leave charities and suppliers facing an uncertain future

The DMA calls on HMRC to postpone new VAT regulations for organisations using mail, as the guidance promised has failed to materialise, leaving organisations in an intolerable position.

With the HMRC’s self-imposed deadline for guidance looming on April 1, organisations are left with uncertainty just two days before that deadline expires. We ask for this to be extended, until their position can be clarified.

The situation stems from whether VAT should apply to the ‘single-sourcing’ of direct mail services, where process like print and post are combined. Contradictory advice left many direct mail businesses facing huge retrospective fines. The DMA successfully lobbied the government to waive such fines.

However, the position of companies like charities remains unresolved. Such businesses are unable to reclaim VAT through agency agreements and disbursement, leaving these companies to pick up the VAT tab.

On 1 October 2014, HMRC decided to allow organisations to use the existing arrangements for another six months to 1 April 2015, following discussions with the DMA and Charity Tax Group (CTG).

Organisations continue to wait for new guidance and today (Monday 30 March), it is still outstanding from HMRC.

This places organisations in an intolerable situation. The DMA and CTG urge the government to postpone the implementation of the new rules on April 1.

The following issues remains unresolved:

• The ability to treat a mailing service as a multiple supply for VAT purposes (and protect the VAT zero rating of the printed matter);
• Whether unaddressed mailings (also known as door drops) are covered by the retrospection concession; and
• Whether data manipulation is necessary and essential for the preparation of mail packs.

The DMA and CTG dispute the views of HMRC officials on a number of points and think it is intolerable for organisations to adhere to the new regulations without resolving these issues.

Mike Lordan, the DMA’s head of external affairs said:

“How are organisations like charities expected to run their mail activities when they don’t know how the new regulation apply on April 1? It’s an intolerable situation, and one that both we and CTG urge the government to postpone the implementation of the new rules until full guidance can be issued.”