Please find the slidepack from the Not For Profit breakout session at Grant Thornton's VAT Club event held in London on 16th September 2015. This high level update covers Direct Marketing in the UK, the impact of HMRC Brief issued on 15 July 2015, and transitional arrangements.

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Not For Profit
16 September 2015

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Contact details
Carolyn Risdell
Senior Manager
carolyn.risdell@uk.gt.com
020 7728 3412
Yago Lamela
Manager
yago.lamela@uk.gt.com
020 7728 2602

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Agenda
• Introduction
• Direct Marketing update & discussion

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What is Direct Marketing?
• Direct marketing via mail (both addressed and unaddressed) typically involves the
production or acquisition of printed matter to be distributed and any or all of the services
below:
• posting or arranging the posting of customer mail (such as publicity, advertising
material or promotional goods) to many recipients,
• analysis or manipulation of data for marketing or strategic purposes
• purchase/rental of third party mailing lists
• analysis of own and customer data used to produce reports on campaign results and
advice on strategy.

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Historic VAT treatment
• Prior to recent changes:
• Supplies of direct marketing services were typically being treated as a single supply of zero-
rated printed matter on the basis the key element was zero-rated.
• HMRC reviewed this treatment and consulted on appropriate changes during 2014.
• Following this process HMRC have issued updated guidance:
• Revenue and Customs Brief 10/2015
• Update of Notice 701/10 – Zero-rating of books and other forms of printed matter
• Update of Notice 700/24 – Postage, delivery charges and direct marketing

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HMRC Brief – 15 July 2015
• HMRC has observed a number of businesses making supplies of printed matter combining
other services with this and zero-rating the entire supply as a single supply of zero-rated
delivered goods.
• HMRC is of the opinion that these supplies should be treated as a supply of standard-rated
direct marketing services and not zero-rated.
• HMRC also provides guidance on situations where it will not raise an assessment for past
errors under the transitional arrangements and settlement terms for businesses who do
not meet the criteria for the transitional arrangements.

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Direct Marketing – Transitional
Arrangements
• HMRC will not take any retrospective action against supplies made prior to 1 August 2015
where:
• the supplier has zero-rated a separate single supply consisting of either addressed or
unaddressed mail only (different treatment for each)
• there has been a misunderstanding by a supplier as to the VAT treatment
• There has been no "abuse"/arrangement are not artificial
• If a supplier wishes to adopt the transitional arrangement it must notify HMRC of its
intention to do so by 30 November 2015.
• If notification is not provided, the supplier cannot take advantage of the transitional
arrangements.
• Risk: HMRC assesses the supplier who then seeks to recover the VAT from his
customer.

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Transitional Arrangements –
Addressed Mail
• HMRC defines this as "the supply of printing and mailing of zero-rated marketing material to recipients
based on data (such as lists of customers) provided by the customer …". HMRC considers the
following services to be ancillary provided no other services are supplied with them:
• creative design, drafting and preparation of printed matter
• printing of direct mail packs using pre-sorted/unsorted data provided by the printing
supplier's customer so that the mail packs include names, addresses, postcodes and
barcodes
• printing of direct mail packs and correction data supplied by the printing supplier's
customer –provided to comply with Royal Mail's address format guidance, Mail
Preference Service requirements and/or the removal of "gone-aways" and the deceased.

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Transitional Arrangement –
Unaddressed Mail (Door Drops)
• The transitional arrangements set out by HMRC will only apply to door drops where it can
be demonstrated that the supplier's service exclusively consisted of the printing and delivery
of zero-rated printed matter and the customer has instructed the supplier on the
location and time of the deliveries.
• HMRC advises that the business should retain evidence e.g. any contracts/agreements,
invoices to demonstrates the conditions are met.
• i.e. the business has not:
• provided the door drops as part of a supply of direct marketing services.
• been invoiced for services such as strategic, planning or other supplies made to the customer by any
third party unless they were treated as disbursements.
• artificially split these supplies from other supplies it may have made to its customer

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Settlement
• Where the transitional arrangements cannot be used, suppliers will have to settle with
HMRC by submitting an error notification
• For these purposes the supply can be treated as multiple supplies of goods and services
• zero-rating can apply to the supply of printed matter and ancillary services (such as design
and printing)
• VAT must be accounted for on additional services such as:
• marketing
• strategic advice
• response handling
• distribution

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Looking forward –zero-rating
• HMRC Notice 700/24 updated:
• Supply comprises solely of printed matter, then it is treated as a supply of goods, usually
taxable at the zero rate e.g. booklets, brochures, pamphlets and leaflets
• The following services may be treated as ancillary to the supply of zero-rated printed matter
provided that no other services are supplied with them:
• the creative design, drafting and preparation of printed matter
• the printing of direct mail packs using pre-sorted or unsorted data
• the printing of direct mail packs and correction of data supplied (provided that this comprises the
removal of 'gone aways' and deceased or to comply with the requirements of the Mail Preference
Service or Royal Mail address format.
• Supply comprises solely of delivered goods (i.e. supply and delivery to the customer under
one contract)
• Supplies of direct marketing (services over and above this) will be standard-rated

12. © 2015 Grant Thornton UK LLP. All rights reserved.
Looking forward – options
• HMRC agrees that 'where the printed matter and any services are supplied separately then that may
comprise multiple supplies and each component is taxed according to its VAT liability'.
• Therefore, if we are buying standard rated services that could change a supply of zero-rated
printed matter or delivered goods we can:
• seek to use a separate supplier for these services, or
• separate contracts could be considered subject to "abuse" rule; and/or
• consider use of the disbursement rules (provided certain conditions are met) for the royal mail
element so that this aspect is treated as being exempt from VAT

13. © 2015 Grant Thornton UK LLP. All rights reserved.
Any Questions?

14. © 2015 Grant Thornton UK LLP. All rights reserved.
Contact details
Carolyn Risdell
Senior Manager
carolyn.risdell@uk.gt.com
020 7728 3412
Yago Lamela
Manager
yago.lamela@uk.gt.com
020 7728 2602

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