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HMRC internal manual

VAT Postal Services

Scope of the exemption: services covered by the Universal Services Obligation (USO)

As the public postal services, Royal Mail is obliged under the terms of its licence or, from 1 October 2011, the provisions of a Universal Postal Service Order and Regulatory Conditions made under the Postal Services Act 2011 (PSA 2011, VPOST3500) to provide a universal service, known in the UK as the USO. This includes services for letters posted individually (such as first and second class mail) and including a registered and insured service and incoming and outgoing services for letters posted from and to addresses outside the UK. The licence or PSA 2011 requires such services to be provided at affordable prices determined in accordance with a public tariff that is uniform throughout the UK. All services covered by the USO remain exempt from VAT.