HMRC has agreed to postpone the start date of new VAT treatment of direct mailing services, which is expected to increase many charities’ costs by “tens of millions” of pounds, from 1 October 2014 to 1 April 2015. This is designed to give charities more time to put in place new arrangements.
The postponement follows discussions between the Charity Tax Group, Direct Marketing Association and HMRC.
The new VAT treatment involved treating printing and distribution of mail-packs as a supply of standard rated direct marketing services. The change, announced in July 2014, caused confusion not least because some charities had received earlier confirmation from HMRC that this was not the case.
Carry on until April 2015
The new agreement allows charities to continue using existing arrangements until 1 April 2015 without the risk of HMRC taking retrospective action, except in cases where HMRC judges these to constitute avoidance or abuse.
John Hemming, Chairman of Charity Tax Group, said:
“This is excellent news because it gives time for charities to put in place revised arrangements meeting the deadline of 1 April 2015 while minimising additional VAT costs. Ten of our members had calculated that their retrospective liability could have been as high as £6 million – the impact for the whole sector would have been tens of millions”.
However, further clarification is still required on some issues, and HMRC will issue detailed guidance in the New Year.
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