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Online retailers urged to make VAT refund claim

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The European Court of Justice has just released its opinion on the VAT liability of Royal Mail’s postal services, a case that has been rumbling on for some time, says Hannah Dobson, VAT director at accountants Smith & Williamson. Historically, Royal Mail has been able to treat all its services as VAT exempt, with other postal service providers such as DHL and TNT being required to charge VAT. But the ECJ has now ruled that this position distorts competition.

“As a result of this decision, certain of Royal Mail’s services, being those negotiated on individual terms, are no longer exempt but are subject to VAT,” Dobson explains. “The High Court in the UK needs to determine the exact services of Royal Mail that should be subject to VAT, but in the meantime businesses which have had a contract with Royal Mail at any time since 2000 should submit a protective VAT claim. Even though we await a final outcome from the United Kingdom’s High Court, businesses should get the reclaim process underway.”

Any company that has an individual contract with Royal Mail could have a VAT claim to make, says Dobson, since services previously billed by Royal Mail as VAT exempt could now be treated as though they were VAT inclusive services. This would then allow companies to claim back the relevant VAT percentage of amounts previously paid to Royal Mail.

Claims could be restricted to three or four years (the latter from 1 April 2009), or potentially claims could go back to 2000 when Royal Mail’s services were opened up to competition.

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