HMRC has finally lifted the threat of retrospective penalties to businesses using so-called single sourcing to lump together their direct mail costs, which could have put hundreds of firms out of business.
Although the DMA had struck an agreement in principle late last year, the taxman has now confirmed the move in writing, confirming companies using the practice will have until April 1 to get their houses in order.
In the letter, HMRC has agreed that its guidance on Postage and Delivery Charges 700/24 is open to misinterpretation and confirms that it does not intend to take any retrospective action against companies that have “misunderstood” the guidance.
HMRC has also confirmed that data processing that is necessary to meet the mail operator’s specifications – such as address cleansing and enhancement – can be included as part of a zero-rated supply of print.
In a blog post, DMA director of external affairs Mike Lordan said: “This is a great result for the industry – the latest letter from HMRC is very different from their original position back in August 2014.
“We have not only removed any threat of retrospective penalties, but have also ensured that the industry still has a way to mitigate VAT on postage through agency agreements and disbursements in a way that is accepted by HMRC.
“I’d like to thank those DMA members who provided documents and correspondence that really helped us in these negotiations with HMRC.”
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