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HMRC internal manual

VAT Books

Books: The package test

Introduction

You should read this section if you are considering a package which consists entirely of printed matter.

  • If your package consists of both printed matter and other, non-printed matter, you should consult VBOOKS6000.
  • If you are considering a charity direct mail pack, you should first consult VBOOKS7000.
  • If your package is supplied with marketing services, as the supply of mail shots often is, then you should refer to VBOOKS5900.

What is the package test?

The package test is a concession offered to the printing trade, when standard and zero-rated goods are supplied together for a single price and there is no predominant item - in other words, we would consider the supply to be a multiple supply. In this case, the liability of a package of printed matter may be calculated according to the liability of the articles which predominate, numerically, within it.

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When might the package test be used?

If standard and zero-rated goods are supplied together for a single price, the price must normally be apportioned and VAT accounted for on the standard-rated items. However, one of the exceptions to this rule is packages consisting entirely of printed matter. In this case, a trader may choose to use the package test.

Printers may apply the package test in order to simplify the VAT treatment of their supplies. Traders may change from the package test to separate itemisation and vice versa, to ensure the most tax-effective results. We do not however, allow traders to change their minds retrospectively.

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How to judge whether the package test has been correctly applied

If you are considering a package of printed matter, you should ask yourself the following questions.

  • Does the article truly constitute a package?
  • Is the package a single or multiple supply?
  • Has the liability of each item been correctly judged?
  • Has the liability of the whole package been correctly decided?

Does the article truly constitute a package?

A package is a collection of printed matter enclosed in some sort of wrapper. The most common examples are:

  • packages contained in an outer Polythene or paper envelope, such as a package sent to a shareholder which includes company reports, circulars, a proxy voting form and a reply-paid envelope;
  • cardboard folders with pockets into which are inserted a variety of forms, leaflets, etc.

A printer who simply produces a variety of work for a client cannot apply the package test unless all the articles physically form a package when they are despatched.

Is the package a single or multiple supply?

Please note: You must determine this point before applying the package test. If the package is a single supply, as it will often be, then the trader cannot apply the package test.

If one element of the package is the principal or significant element, to which all the other elements are ancillary, integral or incidental, then the trader is making a single supply. If more than one element is distinct and independent then the trader is making a multiple supply. For further guidance on this matter please refer to VATSC - Supply and consideration.

Has the liability of each item been correctly judged?

If you are in doubt on this issue, please refer to VBOOKS3000.

Has the liability of the whole package been correctly decided?

You need to decide whether a package consists mainly of zero-rated or standard-rated printed matter.

You should judge the liability of the whole package by deciding which liability applies to the majority of the contents, with the outer envelope not included in any of the calculations. If the numbers are equal, the package should be judged upon the basis of which items cost the most to produce.