Technical update

Retrospective UK VAT liabilities for charities and suppliers of bulk mailings

17 August 2015

HMRC has recently published Revenue and Customs Brief 10 (2015) to explain its approach to supplies of direct marketing.

Many suppliers did not charge VAT on services including production and postage/delivery of marketing materials, as they were considered to be zero-rated single composite supplies with the production of printed materials as main supply with postage as “ancillary” cost. HMRC’s view is that these supplies should properly be characterised as a supply of standard-rated direct marketing services, rather than zero rated supplies.

Therefore VAT at the standard rate must be accounted for on any other services supplied with the printed matter, including but not limited to:

  • marketing
  • promotional
  • strategic
  • planning
  • response handling
  • distribution
  • media insert
  • purchase of third party mailing lists
  • data targeting analysis
  • data cleansing
  • other services not ancillary to the supply of printed matter

HMRC agreed to apply a transitional period (which ended on 31 July 2015) for certain cases. There will not be any retrospective action for supplies made prior to 1 August 2015 where the supplier has zero-rated a separate single supply consisting of either addressed or unaddressed mail only. Businesses need to notify HMRC by 30 November 2015 if they want to adopt the transitional arrangements and want to avoid retrospective VAT assessments.

Where a supplier has made supplies of direct marketing services prior to 1 August 2015 that are not within the scope of the transitional arrangements they may settle their outstanding VAT liabilities. For the purpose of the Settlement the supply of marketing services may be treated as multiple supplies of goods and services using the following analysis.

  • Zero-rating can be applied to the printed matter element of the supply and any of the ancillary services described in VAT Notice 700/24.
  • VAT at the standard rate must be accounted for on any other services supplied with the printed matter (including but not limited to marketing, promotional, strategic, planning, response handling, distribution, media insert, purchase of third party mailing lists, data targeting analysis, data cleansing, other services not ancillary to the supply of printed matter).
  • Suppliers that believe they have accounted for VAT correctly or have a clear ruling from HMRC which meets the tests for legitimate expectation do not have to accept the terms of the settlement. Suppliers wishing to settle must notify their acceptance to HMRC by 30 November 2015.


TMF Group suggests companies involved in direct marketing services review the VAT treatment of all supplies within either the transitional or settlement arrangements. It is important to understand the full scope of HMRC’s transitional arrangements, the time limits for claiming the retrospective concessions/settlements. Not taking the necessary corrective actions by the deadline laid down by HMRC can be costly.

Got questions? Contact our expert VAT team.

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Written by

Dr. Robert Nagy

VAT Account Manager

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