Cashflow bonanza for mail-order companies after VAT court victory defies pundits

The case will have a substantial effect on mail order delivery costs, the firm said.

Peter Jenkins, head of Ernst & Young’s indirect tax practice, said: ‘Following this win and as long as they structure their agreements correctly, mail order companies that use the Post Office (Royal Mail or Parcelforce) will be able to allow the exact postal element of postage and packing charges paid by the customer, to be treated as VAT exempt rather than taxable.

‘This will result will release very significant free cash flow to mail order businesses.

‘This victory is all the more satisfactory because the Court of Appeal has not granted leave to HM Customs for them to appeal to the House of Lords.

Ernst & Young has been fighting this case for the last three years and the success achieved is contrary to the predictions of a number of leading VAT pundits. This is a clear triumph of common sense over the narrow view taken by Customs.’

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