The direct mail industry has welcomed an Ofcom ruling which gives a new Royal Mail “access” service a zero VAT rating in a move which could further rebuild the market following last year’s Covid wipeout.
Access mail is processed by the likes of Whistl and UK Mail, who collect and sort direct mail and other bulk letter mailings from large organisations, such as bank statements, utility bills and advertising mail, before handing them over to Royal Mail for delivery.
The new service, dubbed Mailmark Economy Service D+5, launched at the beginning of 2021 and defers the mail until there is another item already being delivered to the recipient’s address, subject to a maximum of four days after it enters the network.
It builds on the existing scheme, Access D+2, which guarantees that once an item enters Royal Mail’s network from a rival operator Royal Mail delivers that item to the recipient the next working day.
Following a consultation, Ofcom has now ruled that under HMRC rules, the D+5 service will be VAT exempt, in line with the D+2 service. Changes come into force on April 5, the start of Royal Mail’s new financial year. This gives customers sufficient time in which to develop systems and update pricing, avoiding the additional complication of VAT credit notes.
The decision has been welcomed by Strategic Mailing Partnership (SMP), the industry group set up to promote direct mail and build closer ties between mailing houses, Royal Mail and private postal operators, enabling members to save money on D+5 mailings.
Ofcom said it anticipated the D+5 service would become an important tool in maintaining effective competition in bulk mail services, promoting efficiency within Royal Mail’s delivery operations and offering benefits to postal service users.
SMP chair Judith Donovan CBE said: “This is great news for SMP members as it means they will not have the added expense of VAT to pay. Anything that simplifies the process or reduces cost is extremely welcome.
“The new economy service offers excellent value and is just another way our members can make the most of the continuing interest in direct mail.”
Full details about the D+5 Mailmark economy service can be found on the Royal Mail website>
Last week, Royal Mail upgraded its revenue forecast for the second time in less than a month, reporting it now expects sales to be £900m higher than last year – at around £8.6bn – and, for the entire group, adjusted operating profits will hit around £700m, compared with £325m a year ago.
The postal giant has not only benefitted from the online shopping surge but is also witnessing a resurgence in direct mail, business mail and even stamped mail as consumers fall back in love with the humble letter.
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