VAT rules agreed, but with a snag

The taxman has finally got round to issuing new rules on VAT arrangements for postage and so-called “single-sourcing”, although there is a sting in the tail for some businesses.
Direct marketers have been waiting since January to find out when the new rules will come into force, following extensive negotiations with the DMA and the Charity Tax Group, which actually kicked off in January 2012.
HMRC has now confirmed they will come into force on August 1. The DMA says that the costs of all the data work required to meet postal operators’ requirements – including advertising and direct mail – can be zero rated if supplied with zero rated print.
DMA direcor of external affairs Mike Lordan (pictured) said: “We’re pleased that despite initial reluctance, HMRC have accepted the arguments that were made to widen the scope of data services that can be included as part of a zero rated supply of print, to include suppressions such as MPS, in addition to address correction.
However, in what will undoubtedly cause a sharp intake of breath at some businesses, under certain circumstances a supplier providing direct marketing services such as list buying or targeting together with zero rated print could be assessed as providing a “single supply” of a DM service.
This would mean that the whole supply – including the zero rated print – would become subject to VAT at the standard rate of 20%.
Clear as mud? For more information, visit the DMA website >