Following discussions between the Direct Marketing Association (DMA) and HMRC any changes to the VAT treatment of direct marketing services have been postponed to 1 April 2015.
In our October Charity Review, we commented on HMRC’s view that direct mailing services are single supplies of marketing and therefore subject to VAT at 20%. This is despite the fact that the mailing comprises mainly of zero rated printed matter.
Further guidance is to be issued by HMRC shortly but this is likely to confirm their policy that a single supply of delivered marketing material (currently treated as zero-rated) will become a standard rated supply of marketing service.
The change could result in a significant increase in irrecoverable VAT. Those charities affected should be reviewing the contractual terms under which services are procured. Unless contracts can be structured in a way to retain zero rating then, depending on HMRC revised policy, a legal challenge to this change is almost inevitable.
For more information, please contact Alan Pearce or your usual Blick Rothenberg contact.