Law firm pursuing £220m VAT refund for Royal Mail customers

Law firm DLA Piper has said it has secured a tribunal to potentially recover more than GBP 220m in VAT from the UK government on behalf of Royal Mail’s business customers. The company said the First-Tier Tax Tribunal will take place in early 2013, and is inviting businesses to join over the next few months in seeking funds from HM Revenue & Customs.

Royal Mail’s postal services were treated as exempt under the Value Added Tax Act 1994. However, DLA Piper said a previous case brought by TNT determined that the “vast majority” of Royal Mail services should actually be chargeable to VAT under the European Union’s Sixth VAT Directive or Principal VAT Directive.

The law firm said if the Tribunal finds in the current case that VAT is embedded into the price of the postal services when those services should have been properly chargeable to VAT, all businesses that have made use of Royal Mail postal services will be entitled to reclaim the input tax from HMRC for the last four years.

If the case is successful, it could also provide the opportunity for a subsequent case to reclaim the input tax in relation to a far longer period of time, said DLA Piper.

The lawyers said if a taxpayer joins the lead case and the lead case is successful, their case will also succeed. This will also give rise to significant cost savings.

Les Allen, lead litigator in the case and a Senior Consultant at DLA Piper, said: “The claims for input tax credit are likely to be well in excess of the £220m estimated by HMRC. Many businesses use Royal Mail’s services and they will be entitled to be credited for the VAT they have paid unknowingly because it is treated as having been embedded into the price paid.”

“After lengthy negotiations at the Tribunal, we have a very clear question to be answered in the hearing next year that puts us in a strong position for winning this case. I would urge all businesses that have already submitted a claim, and those that have not yet done so, to join the lead case to ensure they benefit from the successful outcome we are hopeful for,” added Allen.

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