Some of the Royal Mail’s postal services became subject to VAT from 2 April 2012, including Cleanmail.

We asked HMRC the question back in March whether VAT would be recoverable by NHS bodies on these taxable mailing services and was advised as follows:

HMRC stated that COS heading 13; Collection, delivery and distribution services – applies to services provided by organisations other than the Royal Mail. For example, services provided by couriers, Rail Freight, Federal Express, UPS etc. and therefore, these expenses do not qualify for COS deduction.

HMRC have subsequently agreed (although not yet confirmed by the Treasury) that the removal of competition barriers and application of VAT on certain Royal Mail services had resulted in them being treated the same as other private sector providers. NHS organisations should therefore recover VAT until clarification was received from the Treasury policy team.