The DMA is warning suppliers of print-based marketing products and services that they run the risk of being slapped with a hefty VAT bill if they fail to get to grips with complex legislation.
The warning coincides with the launch of the DMA VAT Helpdesk, a free service that provides advice to marketers to clarify the complex rules and regulations specifically concerning printed marketing goods and services.
Many organisations that use print-based direct marketing media are unable to reclaim VAT and look to their suppliers to minimise their VAT liability, says the DMA, which adds this is achieved through the design of the printed material and managing the contents of mail packs so that they are classified as ‘zero rated’. VAT liability can also be reduced by applying special exemptions for charities and using techniques such as ‘single supply’.
The DMA’s VAT Helpdesk was set up at the urging of the industry because the guidelines published by HMRC aren’t clear and often need interpretation to understand how they apply. Most accountants and financial managers don’t have the specialist knowledge – especially regarding what precedents and case law exists – to be certain that they are applying the correct interpretations.
With pressure piling on suppliers to reduce cost for their customers, companies are waking up to the fact that they need to assess VAT correctly since they, not their customers, are liable for any penalties. HMRC can routinely backdate assessments four years and apply a fine of up to 100 per cent of the VAT shortfall in addition.
Commenting on the launch of the DMA VAT Helpdesk Richard Evans, head of compliance and legal services for the DMA, said:
“We’re aware of a number of companies that have been caught out by misinterpreting the VAT rules. Unfortunately it is a case of ‘supplier beware’. In the past year we’ve seen some companies being hit by HMRC with bills totalling millions of pounds. There’s a huge grey area, for instance, around the point at which you are no longer supplying zero rated goods to a full VAT rated service. That’s why our free helpline will help companies navigate the complexities of the VAT rules in this area.”
Run in conjunction with Zero VAT, the VAT Helpdesk is staffed by experts with many years experience who can provide guidance on what can be zero rated and identify where there is an element of risk. The helpline is not designed to give general advice on VAT issues but is specifically for DMA members wanting guidance on the supply of zero rated goods.
