Find out how to apply VAT to charges for postage, delivery services and how to treat direct marketing services involving distribution of printed matter.
This notice cancels and replaces Notice 700/24 (June 2015). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
1.1 What this is notice about
This notice explains how VAT applies to charges made for postage and delivery services and also the treatment of direct marketing services involving the distribution of printed matter.
1.2 What’s changed
Paragraph 2.2 has been revised to provide greater clarity for delivered goods supplied on approval.
1.3 Who should read this notice
You should read this notice if you:
- supply goods which you deliver to your customer
- provide a delivery service involving other people’s goods
- operate a direct marketing service that involves printed matter
1.4 Postal charges and VAT exemptions
Postal services provided by the Royal Mail Group Limited under its remit as the universal postal service provider in the UK are exempt from VAT if they’re subject to price and regulatory control. This exemption does not extend to similar services provided by other suppliers, even where they might be seen as being in direct competition with Royal Mail Group Limited, as Royal Mail Group Limited is the only universal service provider in the UK.
The purchase of unused postage stamps does not attract VAT, this is explained in VAT Notice 701/8: postage stamps and philatelic supplies. But if any delivery charge you make to your own customers includes the cost of stamps you buy from the Post Office you may have to charge VAT on the whole amount including the cost of those stamps.
2. Delivered goods
Where goods are delivered to a customer and the price includes an amount for this service this is a supply of delivered goods. The way any delivery charge is treated for VAT purposes depends on the circumstances in which the goods are supplied. If you supply direct marketing services that involve the distribution of printed matter, please refer to section 3 of this notice.
2.2 How to work out the VAT treatment for delivered goods
|I deliver goods to my customers but make no additional charge||if delivery is free, or the cost is built into the normal sales price, VAT is accounted for on the value of the goods based on the liability of the goods themselves.
This applies whether or not delivery is required under the contract.
|I supply goods on approval and make an additional charge for delivering the goods||at the point of delivery no supply of goods has taken place and the delivery of the goods may not result in any supply of those goods. The service provided is not one of delivered goods. The delivery service is a separate supply to enable the customer to view the goods prior to making a decision as to whether or not to purchase them.|
|I deliver goods to my customer and make an additional charge||an additional charge for delivery will follow the liability of the goods.
The important test is whether delivery is included in the contract. You’re making a single supply of delivered goods if, under the contract, you must deliver the goods to a place specified by the customer. This might include the customer’s:
friends or relatives
The position is not affected by whether the charge for delivery is separately itemised or invoiced to the customer. In either case there is a single supply of delivered goods for which the VAT liability is based on the liability of those goods.
|delivery is not required under the contract or I deliver somebody else’s goods||a delivery service is treated as a supply which is separate to that of the goods. The service provided is not one of delivered goods. This applies where you :
supply goods under a contract that does not require delivery but where, nevertheless, you agree to deliver the goods and make a separate charge
you provide a service of delivering somebody else’s goods (but see section 3 for direct marketing services).
In this case the liability of the delivery charge is not affected by the liability of the goods you’re delivering and is always standard-rated even if the goods are not (but see section 4 if the delivery is to, or from, a place outside the UK.
|I make a separate charge for packing||a separate packing service for which a charge is made will be standard-rated within the UK, but see section 4 if the supply is connected with a movement of goods to, or from, a place outside the UK).|
|I am a retailer using a retail scheme||if you’re involved in the supply of either delivered goods or you charge for delivery, accounting for the charge will depend on the type of scheme used. For each scheme you should follow the guidance in the relevant notice:
VAT Notice 727/3 retail schemes: how to work the point of sale scheme
VAT Notice 727/4 retail schemes: how to work the apportionment scheme
VAT Notice 727/5 retail schemes: how to work the Direct Calculations schemes
3. Direct marketing services using printed matter
Direct marketing can comprise a range of goods and services which, depending on how they are supplied or combined, can result in different VAT liabilities being applied.
3.1 Printed matter
Where the supply comprises solely of printed matter, then it is treated as a supply of goods, usually taxable at the zero rate, for example, booklets, brochures, pamphlets and leaflets. See VAT Notice 701/10: zero rating of books and other forms of printed matter.
The following services may be treated as ancillary to the supply of zero-rated printed matter when they are supplied by the person who has the contract to supply the completed printed matter, provided that no other services (those listed at paragraph 3.3 are supplied with them:
- creative design, drafting and preparation of printed matter
- printing direct mail packs using presorted or unsorted data provided by the printing supplier’s customer, so that the mail packs include names, addresses, postcodes and bar codes
- printing direct mail packs and correction of data supplied by the printing supplier’s customer, data correction includes only:
- amendment in accordance with Royal Mail address format guidance
- amendment to comply with the requirements of the Mail Preference Service
- removal of ‘gone-aways’ and the deceased
3.2 Delivered goods
When the supply of direct marketing extends to the delivery of printed matter only, then you should treat as ‘delivered goods’ in the context of printed matter is as follows:
- the supply of printed matter and delivery to the customer for free (or where the delivery cost is built into the printing charge) is one of zero-rated printed matter
- the supply of printed matter and delivery to the customer under contract for a charge is one of zero-rated printed matter
- the supply of printed matter and delivery to the address of customer’s appointed mail operator in either of the above circumstances is one of zero-rated printed matter
The VAT treatment of direct mail to many recipients is explained in paragraph 3.3. There are situations where delivery may be treated as a disbursement when a supply of printed matter takes place, see paragraph 3.4.
3.3 Direct marketing
Direct marketing by mail (addressed or unaddressed, such as ’door drops’) or inserts in newspapers or magazines typically involves the production or acquisition of printed matter for distribution and any or all of the following services:
- posting or arranging the posting of customer mail such as publicity, advertising material or promotional goods to many recipients, including unaddressed mail (known as door drops)
- analysis or manipulation of data (either provided by the customer or sourced directly) for strategic or marketing reasons, for example, to target direct mail at specific groups based on geography, socioeconomic factors or gender of recipients
- purchase or rental of third party mailing lists, including for amalgamation with customer’s own lists
- analysis of own and customer data to produce reports on campaign results and advice on strategy
When any of the services listed (or other marketing related services) are supplied with printed matter as a single supply, then that single supply is taxable at the standard rate as it is a supply of direct marketing services. Where the printed matter and any services are supplied separately, then there may be multiple supplies in which case each component is taxed according to its VAT liability.
An example of a single supply is where a supplier prints leaflets for a charity and, as part of the contract, amends the charity’s customer data so that address and postcode details are correct. This is a single supply of zero-rated goods.
An example of multiple supplies is where a supplier provides marketing strategy advice to a charity and offers the option, under a separate contract, of printing leaflets. In this case there are multiple supplies, one of standard rated marketing advice and one of zero-rated goods.
Whether there is a single supply or multiple supplies will depend on the facts of each case.
Inserts in newspapers and magazines are normally standard-rated as a supply of advertising. Further information about the relief for charity advertising can be found in VAT Notice 701/58: charity advertising and goods connected with collecting donations.
3.4 Delivery, treatment as a disbursement
When supplying printed matter (as defined in paragraph 3.1) a supplier may treat mail charges by mail operators as a disbursement for VAT purposes as long as the supplier:
- meets the general disbursement requirements outlined in the section on ‘Supplies made by or through agents: other situations’ in VAT guide (Notice 700)
- stops having responsibility for the mail when it’s accepted for safe delivery by the mail company
- passes on any discount or rebate from the mail company to clients in full, sharing it fairly between them
Freepost is an arrangement whereby the recipient (that is, the advertiser) of a returned mailshot pays the postage costs on behalf of the sender, for example, a member of the public. In such a case, a PO Box number will normally also be used.
The supply by Royal Mail of the Freepost and PO Box licences, plus any handling service for which an additional fee is charged, is made to the licence holder. This may be the recipient (advertiser) or an agent handling the mail on the recipient’s behalf. But the supply of postage is made to the sender of the mail, although the recipient (advertiser) or the agent meets the cost.
This means that where an agent is employed to handle the Freepost:
- any recovery of the postage costs by the agent from the recipient (advertiser) is not liable to VAT
- where the licence is taken out by the agent in the name of the recipient (advertiser) the costs may be disbursed to the recipient, subject to the normal rules
4. Goods delivered to or from the UK
4.1 If you deliver somebody else’s goods, including mail and documents
You’re making a supply of freight transport services.
4.2 If you transport goods to or from a place outside the UK
|If you transport goods to or from||then you’re making a supply of|
|an EU member state||intra-EU freight transport|
|a place outside the EU||international freight transport|
You’ll find further information on how these supplies should be treated for VAT purposes in VAT Notice 744B: freight transport and associated services.
4.3 If you supply only the UK leg of an international freight movement
This is also covered in VAT Notice 744B: freight transport and associated services.
4.4 If you supply a separate packing service in connection with a movement of goods
Depending on the contractual terms with your customer, you will probably be making a supply of an ancillary transport service. You can find further information on this in VAT Notice 744B: freight transport and associated services.
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