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HMRC internal manual

VAT Postal Services

Scope of the exemption: general

From 31 January 2011, only public postal services provided by a universal service provider, and the supply of related incidental goods, qualify for exemption. This meant that some postal services supplied by Royal Mail - those which are individually negotiated (see VPOST4150) or not subject to any price and regulatory control - became liable to VAT at the standard rate.

Until 30 September 2011, public postal services meant those services which Royal Mail was obligated to provide under or pursuant to, the terms of its licence - including a regulatory requirement as regards price control (see VPOST4100).

From 1 October 2011, public postal services means any postal services which Royal Mail is required to provide in the discharge of a designated USP (Universal Service Provider) condition, a USP access condition, or a transitory condition under paragraph 5 of Schedule 9 to the Postal Services Act 2011 (see VPOST3500), which is imposed only on a universal service provider.

From 1 April 2012, the Postal Services (Universal Postal Service) Order 2012 came into effect. The Order describes the services which must be offered by Royal Mail as a universal postal service, and the standards with which those services are to comply, as required by section 30 of the Postal Services Act 2011 (the ‘Act’). This effectively limits the VAT exemption to services specified within the Universal Service Obligation and access services which are mandated and price controlled, and the supply of related incidental goods.