Vatman lurks for direct mail firms

Vatman lurks for direct mail firmsCompanies which supply direct mail to charities and financial services firms have been warned that they could soon get a knock on the door from the “Vatman” after a fresh warning from the DMA over bulk mail practices.
The issue dates back to January 2012, when Ofcom let Royal Mail set its own prices for commercial bulk mailing services, automatically making them liable for VAT under HM Revenue & Customs rules.
While most businesses can claim back VAT payments, charities and companies working in financial services – two of the biggest users of direct mail – cannot.
At the time, the DMA warned about the dire consequences of such a move. But since then some companies have combined postage costs with production costs in order to cut out the VAT liabilities.
Two years on and the DMA has now issued a new warning that this practice, known as “single sourcing”, may not be seen as exempt from VAT when the long-awaited guidance finally emerges from HMRC.
The industry body claims companies could find themselves with a large backdated tax bill as well as being liable to pay penalties.
Mike Lordan, the DMA’s director of external affairs, warned that the HMRC’s lack of communication could put many direct mail suppliers out of business.
“Thanks to HMRC taking an unacceptable length of time to respond to our request for clarification, many businesses now could be sitting on a huge VAT timebomb,” he said. “While we’ve advised businesses to take a cautious approach, the ambiguity surrounding the rules means that many businesses have interpreted the rules differently.
“Until now, HMRC has not issued guidance to the contrary. HMRC created this vacuum so it would be extremely unfair for them now to penalise companies.”
The DMA said it was planning to lobby Treasury and business ministers to prevent HMRC from imposing backdated VAT charges and penalty fines on businesses covering the period when the industry waited for guidance.
Ironically, given that Royal Mail triggered the threat by setting its own bulk mail prices, MarketReach boss Jonathan Harman has called on HMRC to work together with the wider mail industry.
He told Post & Parcel Info: “Royal Mail would be concerned about any further increase in mailing costs for charities and other businesses that are unable to recover VAT,” he said. “Direct contracts for postal services between charities or financial services companies and Royal Mail are unaffected – including Downstream Access contracts which continue to be exempt from VAT.”

Related stories
Royal Mail takes £24m DM hit
Royal Mail trials Sunday service
Royal Mail demands TNT probe
Ofcom probes Royal Mail charges
Mail revamp sparks VAT bombshell
Royal Mail to set its own prices
Industry warns of direct mail exodus

Print Friendly

2 Comments on "Vatman lurks for direct mail firms"

  1. Vatman gunning for direct mail firms as HMRC drags its feet on ruling http://t.co/sZV1pfXeqj #directmail #directmarketing

Comments are closed.