DLA Piper in Royal Mail VAT case against HMRC

DLA PIPER has succeeded in its application to bring a lead case against HM Revenue & Customs (HMRC) for value added tax (VAT) levied on Royal Mail’s services. If successful, businesses could recover £220m paid in credit for input taxes.

Previously, postal services had been treated as exempt by Royal Mail under the Value Added Tax Act 1994. However, it was found that Royal Mail services should, in fact, be chargeable under the sixth VAT directive or principal VAT directive after a case brought by TNT.

The tribunal is due to begin in early 2013, affording businesses the opportunity to join the lead case by lodging their claims with HMRC over the coming months.

Introduced in 2009, lead cases allow other taxpayers to attach their cases to it, meaning that if the lead case proves successful; their case also wins, saving substantial costs.

HMRC can refuse to apply a winning decision to the cases brought separately, whereas those under the lead case provisions would succeed by default.

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.”

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