HMRC have issued Revenue & Customs Brief 19/10 following from the budget announcement that certain services supplied by Royal Mail which were previously treated as exempt from VAT, will become liable to VAT at the standard rate.

The change, which will take effect from 31 January 2011, arises as a result of a decision of the European Court of Justice in the case of TNT Post UK Ltd in which it was found that the exemption applying to Royal Mail as the operator providing the public postal service did not apply to supplies made by Royal Mail for which the terms have been individually negotiated.

The services which are likely to be affected as a result of the change include but are not limited to:

• All individually negotiated services
• Parcelforce services
• Door-to-door (unaddressed mail)
• Mailroom services.

Services which Royal Mail is obligated to provide under, or pursuant to, the terms of its licence-and which are therefore subject to price and regulatory control-will remain exempt from VAT (subject to there being no individual negotiation).

The full text of Brief 19/10 is available here.

HMRC's previous comments on the implications of the TNT Post case can be found at http://www.hmrc.gov.uk/briefs/vat/brief6409.htm.