UK Mail heralds VAT breakthrough
UK Mail, the postal services arm of the Business Post Group, has secured an important breakthough that it is confident will soon see the launch of a brand new “Agent for Access” service. This will enable companies in the financial services and charity sectors to benefit from a downstream access postal service which they have previously been unable to enjoy. This unprecedented move extends postal choice to a whole new market of mailers and marks an important development for the deregulated mail sector.
Many of the largest mail users are businesses that are not VAT registered – such as banks, insurance companies and charities. Any VAT they are charged on services they use, has to be taken as a cost. This is down to the fact that they can’t charge VAT themselves when supplying their customers.
“Agent for Access” is the perfect service solution tailored specifically to suit these businesses’ needs.
Up until now VAT rules have put this sector at an automatic disadvantage. Current legislation states that all postal operators (bar Royal Mail) must apply VAT to their postal charges, leaving non-VAT businesses with limited options. For them, enjoying UK Mail’s full range of service benefits has not always come with the same overall cost savings that UK Mail offers other mailers.
So far the solution for such financial service companies and charities has been Customer Direct Access (CDA) whereby the mailer has two contracts. The first is with Royal Mail covering final delivery, with Royal Mail charges being VAT-exempt. The second is with UK Mail for managing mail distribution and the interface with Royal Mail.
However, restrictive entry and usage requirements means only the largest financial services companies or charities can employ CDA, leaving smaller businesses in a difficult dilemma.
This is where “Agent for Access” comes in.
UK Mail’s break-through is a new access agreement with Royal Mail that now allows UK Mail to act in the role of agent for a mailer. Under this arrangement UK Mail pays the VAT-exempt access charge to Royal Mail on the mailer’s behalf. This dispenses with the need for two complex contracts providing mailers with a more cost efficient and simpler service solution all round.
Commenting on this latest development, Business Post’s Chief Executive, Guy Buswell, says:
“Agent for Access marks a significant milestone for the non-VAT mailer market. Companies in this sector can now exercise a choice, and enjoy the benefits of using an access service with UK Mail as the operator, without the complexity of CDA, or the disadvantage of VAT on the access charge. Once again UK Mail is leading the way in developing mail competition.”
UK Mail was the first company to offer an alternative postal delivery service in nearly 400 years of postal history, when it began operating in May 2004. UK Mail has now delivered more than two billion items of mail and was recently awarded ‘Downstream Access Supplier of the Year 2006,’ an industry award sponsored by Royal Mail.
With downstream access mail is collected and sorted by UK Mail through its national network of 58 sites and delivered into Royal Mail’s 69 Inward Mail Centres on a daily basis. Royal Mail then does the local sortation and final delivery to the destination address.
Up until now the financial services and charities sectors could not enjoy the benefits of downstream access due to the prohibitive VAT barrier. With this sector accounting for 46% of the mail market, competition has been unfairly restricted. In March 2005 the Royal Bank of Scotland Group (RBSG) became UK Mail’s first CDA customer which opened the doors for other major banks and financial services to follow suit. However the market remained limited due to Royal Mail volume requirements for downstream access. UK Mail has been lobbying for VAT parity to overcome the unfair advantage that the monopoly supplier enjoys believing that parity is the only fair solution.
[The new Agent for Access approach has been developed in contact with HM Revenue & Customs and is being submitted for formal VAT Office approval]
Business Post Group
UK Mail is part of the Business Post Group, one of the largest parcel and express mail delivery carriers in the UK. Operating through a network of nearly 140 locations across the UK, the Group and its associates employ over 5,000 people, has a fleet of more than 3,000 vehicles and is responsible for the movement of over 150,000 consignments every working day.
