Earth Island: SMP welcomes landmark Ofcom VAT ruling

Earth Island

Earth Island: SMP welcomes landmark Ofcom VAT ruling

The Strategic Mailing Partnership has welcomed an Ofcom ruling that a new Royal Mail wholesale economy service should be VAT exempt.

The move will enable members of the SMP, the industry body that represents UK mailing houses, to save money on mailings made through the recently introduced D+5 Letters access service. The service defers mail until there is another item being delivered to the recipient’s address for up to four days after it enters the network.

Royal Mail’s wholesale customers include other postal operators – such as Whistl and UK Mail – that pay to access the delivery network. These access operators collect and sort advertising mail and other bulk letter mailings from large organisations, such as bank statements, utility bills and advertising mail, before handing them over to Royal Mail for delivery.

In January, Royal Mail offered the option of a cheaper, slightly slower delivery service than the existing D+2 access service, where mail is delivered the next working day after entering the network.

While Royal Mail will be required to deliver 97.8% of Mailmark Economy mail within four days of it being handed over – a 2.5% higher target than is required for other Access services.

Following a consultation, Ofcom has ruled that under HMRC rules, the service will be VAT exempt, in line with the D+2 service. Changes come into force on April 5, the start of Royal Mail’s new financial year. This gives customers sufficient time in which to develop systems and update pricing, avoiding the additional complication of VAT credit notes.

Ofcom said it anticipated the D+5 service would become an important tool in maintaining effective competition in bulk mail services, promoting efficiency within Royal Mail’s delivery operations and offering benefits to postal service users.

SMP chair Judith Donovan CBE welcomed the move: ‘This is great news for SMP members as it means they will not have the added expense of VAT to pay. Anything that simplifies the process or reduces cost is extremely welcome.

‘The new economy service offers excellent value and is just another way our members can make the most of the continuing interest in direct mail.’

Full details about the D+5 economy service can be found on the Royal Mail website.