Pictured above: Jason Croke

Businesses that make extensive use of Royal Mail and Parcel Force services could be in for a significant cash wind fall following changes to the VAT position on Royal Mail services. 

But whilst some will benefit, many others - such as charities and schools - face higher postage and distribution costs.

The situation has been described by Jason Croke, Head of VAT services at the Wolverhampton and Birmingham offices of Haines Watts, as great news for businesses that are VAT registered and frustrating for organisations that are not.

"It's complex but in short, the decision to put VAT on selected Royal Mail services follows complaints by other commercial providers of postal services who have to charge 17.5% VAT."

A range of other Royal Mail and Parcel Force services will become subject to VAT from 31 January 2011 with some businesses benefiting, and others losing out.

Jason Croke said that for many companies there is an opportunity to reclaim the VAT on their postage expenditure back to May 2006.

"If a business has used Royal Mail or Parcel Force services, including Express and Tracked Services, Catalogues and Magazine Services and International Services then they might be able to reclaim the VAT back. Some companies spend a small fortune week in and week out on postage and so this could really boost their bottom line," said Jason.

Unfortunately, this change in Royal Mail charge will mean than many non-VAT registered entities, such as charities and schools, now face increased costs, without the ability to reclaim the VAT.

"For those organisations who, for whatever reason, are not VAT registered or unable to reclaim VAT, my advice would be to continue using the Royal Mail's services which are not subject to VAT, and shop around for the best deal if you require any that are," said Jason.

For more information on Haines Watts, view their website here: www.hwca.com