Printed Mailing Packs – Update on VAT
Charities and their advisers will vividly recall the events of 2014 and 2015 when HMRC dropped the bombshell that ‘print companies’ which supplied the full service of producing and delivering mailing packs were not making supplies of delivered zero rated goods (under the ‘package test’), but instead were engaged in ‘Direct Mailing Services’ or ‘Marketing Services’, which were to be treated as standard rated.
This, we were told, was not a change in policy, despite vast numbers of times HMRC officers had confirmed in writing that such supplies were zero rated, and the fact that the guidance from HMRC seemed to suggest as much. It was accepted, however, that the position had not been clearly communicated and accordingly a limited ‘amnesty’ (rather more limited than we had hoped) was offered.
Nonetheless, considerable extra costs fell on charities and their print companies, through increased VAT, and costs of rectifying the position.
CTG put in considerable effort to reduce the impact of this episode and saved the sector considerable sums as a consequence. However, when we met with HMRC we did not mince our words in telling them that, in our view, their interpretation was not only a change of position, but was simply wrong. Of course, there will have been some kinds of activity in regard to which they were right, but their central proposition was wrong, and we made no bones about that.
But, without a test case, there was nothing more we could do.
Unknown to us, a case of that kind was coming forward at that time, but it has taken until April to give rise to a First tier Tribunal decision. We now have that, namely in Paragon Customer Communications Limited (TC06415).
This case relates to supplies to an insurer, and there are other differences between it and charity fundraising packs. But the similarities are more striking. First, HMRC tried to argue that there was a supply of services that went beyond the provision of zero rated goods. They called it ‘a comprehensive service to administer and co-ordinate the provision of insurance details to retail customers of [insurer]’. They did not accept that the essence of the supply was the goods that were delivered. They said it was a ‘service’ rather than ‘goods’. The supply in question involved printing and delivering (though not, as it happens, target selection). The kinds of packs produced in this case are seemingly similar to fundraising packs for charities, only some parts were more individually targeted to each recipient than is likely the case for a charity fundraising pack.
HMRC lost the case. The tribunal held that the supply was one of zero rated goods.
We have no doubt that HMRC will say that this was decided on specific facts. But one fact is clear, namely that HMRC was wrong, and that means that they were probably wrong about the charity situation, just as we told them, very clearly, they were.
Nonetheless, if HMRC appeals, another decision will either confirm my expectations or cause HMRC to be vindicated. It would be wholly unsatisfactory if HMRC decided not to appeal, and yet also decided to maintain the policy they launched upon the sector in 2014. HMRC needs to appeal or to withdraw. CTG will be making this clear to our contacts in HMRC.
Graham Elliott is CTG’s technical adviser
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