Charities and small business set for changes to bulk postal charges
14/February/2012
Small firms and charities need to prepare for an increase in the cost of sending bulk mail when it becomes subject to VAT later this year.
It follows a proposal by Ofcom, the communications regulator, to give Royal Mail the power to set its own prices for bulk mail.
Used by many charities and businesses when sending promotional literature for fundraising purposes and generating new business, bulk mail is currently exempt from VAT charges.
From April 2nd however, bulk mail is set to lose its VAT exemption, meaning anyone using it after this date will be charged an extra 20 per cent.
Most businesses are able to claim back VAT payments, but charities and financial services firms cannot.
The Direct Marketing Association (DMA) has warned that the cost of sending direct mail could rise by £18 million as a result of the changes.
The body said it was concerned that the additional costs could prove to be the "final straw" for many companies.
Mike Lordan, chief of operations for the DMA, said: "The prospect of VAT charges is a serious financial issue for users of bulk mail, but the industry is being left in the dark by HMRC and Royal Mail who have yet to clarify the details about the changes."
There is confusion over how it will be implemented, he added.
"We need to know if the possibility of adding VAT is based on current guidelines or some as-yet unannounced plans, and if VAT will be collected from April 2nd or if there will be a grace period. Most companies can claim back VAT, but this additional cost needs to be factored into cashflow planning. Financial services businesses and charities need to factor this extra cost into their budgets."
A Royal Mail spokesman told charity website Third Sector that any person or organisation using bulk mail would be charged VAT from April 2nd.
"Updated information about new VAT charges is already on our website," he said. "We will be writing to customers shortly to notify them of the changes."
