Three weeks on from its own deadline, HMRC is yet to release any formal guidance on the correct allocation of VAT for organisations that use mail, and the DMA has called on the new Government’s Treasury Minister to ensure no firm is penalised as a result of HMRC delays.
HMRC promised to produce a revised guidance on VAT use in the New Year. A first draft for comment was only released on 16th March, just two weeks before its deadline.
“We had a number of problems with both the content – some of which was factually inaccurate – and the wording of the draft guidance and responded to HMRC on the 20th March with our comments,” said Mike Lordan, the DMA’s Head of External Affairs.
HMRC claim that “purdah” – the six-week government communications blackout during the election period – prevents the final production of any guidance.
It has still to be made clear whether unaddressed mailings (also known as door drops) are covered by the retrospection concession, and whether data manipulation is necessary and essential for the preparation of mail packs.
“We believe that this position is totally unacceptable and that HMRC cannot implement this change when it has not yet published any revised guidance or communicated its intentions publicly,” said Lordan.
Contradictory advice had left many direct mail firms facing huge retrospective fines when they combined direct mail functions under ‘single sourcing’ arrangements.
While the DMA successfully lobbied the government to waive such fines, the position of charities and other firms unable to reclaim VAT through agency agreements or disbursement remains uncertain.
On 1st October 2014, HMRC allowed organisations to use the existing arrangements for another six months to 1st April 2015, following discussions with the DMA and Charity Tax Group.
We now call for assurances that no firm will face fines while the correct guidance remains outstanding.