VAT concession extended until July

HM Revenue & Customs (HMRC) has confirmed that it is extending a transitional period during which a retrospective concession relating to VAT and direct mail will apply.

The Charity Tax Group (CTG) announced on 15 May that the concession would end on 31 July 2015. It also reported that HMRC was planning to publish a briefing explaining changes to relevant VAT notices – 700/24 on postage and delivery charges and 701/10,  zero rating of books and other forms of printed matter – on 5 June but that if it was not possible to do so, it would “extend further the end-date for the transitional period. HMRC has confirmed that CTG can inform charities of this date but will not be publicising this on its website”.

In April 2012, HM Revenue & Customs (HMRC) stripped bulk mail of its VAT-exempt status. Since then, many advertising mail suppliers have used single sourcing – which combines postage and production costs – to remove VAT liabilities for charities, which cannot claim back or charge VAT.

In August 2014, HMRC wrote to the Direct Marketing Association (DMA) trade body – which had been lobbying for guidance on whether it would exempt single sourced advertising mail from VAT – saying the cost of both postage and production would be standard rated for VAT at 20 per cent.

In October that year, HMRC decided to give organisations until 1 April 2015 to carry on using existing arrangements and put in place alternatives, following discussions with the DMA and CTG. Organisations using single sourcing to mitigate VAT liabilities were spared retrospective fines following an agreement brokered by the DMA and CTG.

CTG chair John Hemming said:  “We welcome HMRC’s decision to extend the transitional period until the end of July. This follows a recent meeting with HMRC, where we made it clear that it was unacceptable for charities to be expected to implement new rules without updated guidance having been published

“We remain in discussions with HMRC about the exact scope of this concession and will continue to seek the fairest outcome for charities.”

Moore Thompson has extensive experience both in working with charities and in the complex VAT regime and can provide expert advice to assist charities and not-for-profit organisations with all aspects of VAT compliance and planning, to maximise VAT efficiency. For more information, please contact us.