The European Commission has published a draft directive, which, if agreed by member states, would require VAT to be charged on mail services. However, it is important to remember that Royal Mail cannot currently reclaim VAT that it pays on the services it buys from other companies. Also, the draft directive allows VAT to be charged at a reduced rate.
Therefore, if the UK were to charge VAT at around 5%, we believe that this would largely cover the VAT that is currently paid by Royal Mail, so, contrary to the initial press reports, it should not be assumed that stamp prices would have to rise.
It seems most unlikely that the UK Government will agree to impose VAT at the full 17.5% and so increase stamp prices by several pence and this is not a course of action that we consider would be in the customers’ best interests
