Royal Mail introduce a new payment channel to deal with VAT exempt mail

Further to the Royal Mail‚Äôs announcement regards to introducing VAT on certain postal services, a new payment channel is being introduced named ‚Äėaccount payment‚Äô specifically for 1st & 2nd class mail.

Online PR News – 04-March-2012 – – This will allow these postal services to remain VAT exempt, but it expected that a 2nd class item could increase up to 55p at the upcoming price increase in April 2012.

On Feb 21st 2012, the Royal Mail announced a new payment channel which will allow a significant increase in post prices for 1st & 2nd class post. Stuart McIntosh, Ofcom‚Äôs group director of competition commented in the Daily Post (22nd Feb 2012), that a 2nd Class stamp of 55p is still ‚Äėaffordable‚Äô and will ready the Royal Mail for the future through investment in its infrastructure.

For businesses, it is still possible to reduce this cost by having a SMART ready franking machine and reclaiming the VAT, as well gaining any volume discounts that apply for bulk mail services. In simple terms, unless a postal customer does very low volumes of post, is VAT exempt or is unable to change their current systems, the VAT exempt payment channel may be more expensive than upgrading a franking machine (to SMART) to allow the reclaiming of any VAT cost and gaining discounts.

Also announced is an extension of the deadline date for those using bulk mail services from the 2nd April to the 12 May 2012. The Royal Mail have been mindful of the fact that there are a large number of businesses who are still not ready for these changes and will not be able to fulfil their VAT obligations (mostly through their franking machine, given the volumes of mail). The time extension has been provided for those who are ‚Äėhaving difficulty posting under the revised specifications‚Äô.

In the final part of the notification from the Royal Mail, pricing for all mail will be announced mid-to-late March (subject to Ofcom’s announcements) and at this point will give a clear indication of the pricing structure that will take effect in April 2012. It is expected all pricing will increase significantly, except those protection by the USO regulation.
George Bevan, Managing Director of The Mailing Room commented; "Royal Mail’s announcement once again supports their migration of postal services to become VAT rated and with that, the only way to effectively have access to all services is through a VAT ready franking machine (SMART ready). Businesses that wish to continue using their existing franking machine to reclaim their VAT, plus gain postal discounts, would require support to upgrade their franking machine to SMART.
Those who required to complete valid VAT returns for their postal services, we believe without a SMART ready franking machine, this would be very difficult. We are will continue to support all business mail users throughout this process, and ensure that they are prepared for the any future changes in VAT.‚ÄĚ

If you believe that the changes to the VAT system may affect your franking machine or you require more information, please feel to contact us on 0161 797 7778 or visit