VAT for 1kg Royal Mail parcels starts 1st August 2011
Many of you will have been affected with the changes in VAT From the 31st January this year, where certain Royal Mail services attracted VAT for the first time. The services attracting VAT are International Airsure (to EU destinations), Special Delivery by 9am and Royal Mail Tracked. In addition if you access any Special Delivery service through a contract then it also attracts VAT. All Parcelforce domestic and EU services also attract VAT.
From the 1st August 2011 parcels weighing more than 1kg, posted using certain Royal Mail bulk account services will attract VAT at the standard rate. The specific services affected are:
Mailsort 3 1400
Presstream 1 & 2
Packetpost 1 & 2
Packetsort 1 & 2
Packetpost and Packetsort
If the Packetpost Daily Rate average weight exceeds 1kg, all packets that day will incur VAT, but if the average weight is 1kg or less then they won’t. Likewise for Packetpost Flat Rate contracts, if the contracted weight is 1kg or less then all packets will be VAT exempt, whereas if the contracted weight exceeds 1kg then all packets will be liable to VAT. (Note that this refers to sales orders, and not totals for the day. For example, if a customer makes 3 sales orders in one day, say from different parts of the organisation, each will be treated separately for VAT purposes.)
1kg + parcels sent using Royal Mail’s Standard Tariff rates will not be impacted, so no change for 1st class, 2nd class and Standard Parcels services purchased at Post Offices or via Online Postage.
This is going to be interesting to say the least for some businesses. If your items are roughly all the same weight you’ll be largely certain of your VAT position – you’ll either have an average weight above or below the VAT threshold.
What it will introduce is the ability to game the system for retailers who aren’t VAT registered and so can’t reclaim VAT. If your posting profile is generally below 1kg but on a certain day you have a larger than normal quantity of heavier parcels, which would push your average weight for the day over 1kg, it may be in your interest to delay despatch of a couple of parcels until you have enough light items to bring your average back down.
If you believe that the changes to the VAT system may affect your franking machine or require more information, please feel to contact us on 0161 797 7778 or visit www.themailingoom.com