UK Mail signs agreement to avoid VAT

UK Mail, the postal services division of the Business Post Group and leading alternative to Royal Mail, has signed a breakthrough agreement with Royal Mail that will enable it to avoid VAT charges.

This unprecedented move extends postal choice to a whole new market of mailers and marks an important development for the deregulated mail sector.

VAT is a contentious issue for Royal Mail's rivals because they have to charge it while the state-owned group is exempt.

However, the deal allows UK Mail to act as an agent for Royal Mail in the work that it carries out for clients, which means that it can benefit from Royal Mail's VAT-exempt status for the "downstream" part of the delivery work.

UK Mail is confident the move will soon see the launch of a brand new "Agent for Access" service.

This will enable companies in the financial services and charity sectors to benefit from a downstream access postal service that they have previously been unable to enjoy.

Many of the largest mail users are businesses that are not VAT registered - such as banks, insurance companies and charities.

Any VAT they are charged on services they use has to be taken as a cost, because they can't charge VAT themselves when supplying their customers.

Agent for Access is the perfect service solution tailored specifically to suit these businesses' needs.

Until now VAT rules have put this sector at an automatic disadvantage.

For them, enjoying UK Mail's full range of service benefits has not always come with the same overall cost savings that UK Mail offers other mailers.

So far the solution for such financial service companies and charities has been Customer Direct Access (CDA) whereby the mailer has two contracts.

The first is with Royal Mail covering final delivery, with Royal Mail charges being VAT-exempt.

The second is with UK Mail for managing mail distribution and the interface with Royal Mail.

However, restrictive entry and usage requirements means only the largest financial services companies or charities can employ CDA, leaving smaller businesses in a difficult dilemma.

This is where Agent for Access comes in.

Under the new arrangement, UK Mail pays the VAT-exempt access charge to Royal Mail on the mailer's behalf.

This dispenses with the need for two complex contracts providing mailers with a more cost-efficient and simpler service solution all round.

Commenting on this latest development, Business Post chief executive Guy Buswell said: "Agent for Access marks a significant milestone for the non-VAT mailer market.

"Companies in this sector can now exercise a choice, and enjoy the benefits of using an access service with UK Mail as the operator, without the complexity of CDA, or the disadvantage of VAT on the access charge.

"Once again UK Mail is leading the way in developing mail competition.".

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