Q. When can you claim back tax your business didn’t pay? A. If your business uses Royal Mail under a negotiated contract!

According to leading Accountants Smith & Williamson organisations may potentially be able to reclaim  thousands of pounds from HMRC; and claims should be lodged as soon as possible to maximise pay-back as a four-year rolling cut-off applies.

Any business with individually negotiated arrangements with the Royal Mail covering mailing services (including Parcelforce) could be in line for the VAT pay-back but those involved in large scale mailings will have most to gain. This opportunity has arisen as HMRC confirmed on 31 March that it will consider claims from certain Royal Mail users.

“I believe there could be thousands of businesses up and down the country, both large and small, which could benefit,” said Hannah Dobson, VAT director at Smith & Williamson.

“To maximise their claim, organisations should lodge their request as soon as possible. Retrospective VAT claims are capped at four years, so every day of delay reduces the potential reimbursement. Typically, organisations which have individual contracts with Royal Mail may be able to recover up to 7/47ths of the gross cost of those services,” added Ms Dobson.

Whilst it was announced in last week’s Budget that parcel services of this kind will in future be subject to VAT, this followed a decision by the European Court of Justice which held that VAT should have been charged all along – and it is this ruling which has opened up the possibility of backdated claims.

“A number of organisations have already lodged VAT reclaims on the back of this case. Despite initially stating otherwise, HRMC has now confirmed that it will consider such claims.”

“Given that HMRC has now said that it will look at these claims, businesses should press ahead urgently,” concluded Ms Dobson.

Disclaimer

Smith and Williamson posted this information in a press release and it is posted here in good faith as an opportunity for research by businesses. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing. 6th April 2010.