HMRC has announced changes and affected businesses need to take action before 30 November 2015

1. VAT - Direct marketing services
Impending deadline: 30 November 2015
HM Revenue & Customs (HMRC) recently issued a Brief setting out its revised approach to
supplies of direct marketing involving printed matter. R&C Brief 10/2015 confirms that HMRC's
previous guidance may have been misunderstood by suppliers. Under transitional
arrangements, suppliers may protect their historic position by writing to HMRC by 30
November 2015.
What's the issue?
HMRC has recently published a Revenue & Customs
Brief (R&C Brief 10/2015) setting out its revised position
on the supply of direct marketing services involving
printed matter. Hitherto, suppliers of such services have
treated their supplies as wholly zero-rated on the basis
that their supply principally included zero-rated printed
matter. HMRC has acknowledged that many such
suppliers may have misunderstood guidance contained in
Public Notices and, as a consequence, has stated that it
will not take retrospective action to collect any underpaid
VAT. Affected suppliers have until 30 November 2015
to take advantage of transitional arrangements.
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.
Historic VAT treatment
Historically, following published guidance, many
suppliers of direct marketing services have treated their
supplies as a single supply of zero-rated printed matter.
HMRC has reviewed this treatment and has now issued
updated guidance.
Transitional arrangements
HMRC's view is that, in many cases, what has been
supplied in the past was a single supply of standard rated
direct marketing services. However, HMRC has accepted
that its previous guidance was unclear and that it may
have been misunderstood by some suppliers. In light of
this, HMRC has announced that no retrospective action
will be taken for supplies made before 1 August 2015
provided that the following conditions are met:
 the supplier has zero-rated a supply consisting of
addressed or unaddressed mail only;
 the supplier has genuinely misunderstood the
published guidance; and
 there has been no 'abuse' or artificial arrangements
put in place.
A supplier wishing to adopt these transitional
arrangements MUST notify HMRC of its intention
to do so by 30 November 2015. Failure to do so will
mean that in appropriate cases HMRC is entitled to
assess for any under-declared VAT.
Addressed mail
HMRC define this as "the supply of printing and mailing
of zero-rated marketing material to recipients based on
data (such as customer lists) provided by the
customer…"
Unaddressed mail (aka 'door drops')
HMRC states in its R&C Brief that the transitional
arrangements will only apply to 'door drops' where it can
be demonstrated that the supplier's service consisted only
of the printing and delivery of zero-rated printed matter

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where the customer provides the supplier with direct
instructions as to the timing and location of the
deliveries. Essentially, the transitional arrangements will
only apply if the supplier can demonstrate (and evidence)
that the supply only comprised the printed matter itself
and delivery services. Where the 'door drops' have been
supplied as part of a direct marketing service or the
services of printing and delivery have been artificially split
from other direct marketing services, HMRC state that
the transitional arrangements will not apply.
Settlement in other cases
Business that are unable to take advantage of the
transitional arrangements but have supplied direct
marketing services prior to August 2015 may settle any
outstanding VAT liabilities by making a voluntary
notification to HMRC by 30 November 2015. Under
this arrangement, businesses will be entitled to zero-rate
the printed matter and any ancillary services. However,
VAT at the standard rate will be due on any other
services supplied with the printed matter including (but
not limited to) marketing, promotional, strategic,
planning, response handling, distribution, media insert,
purchase of mailing lists, data targeting analysis, data
cleansing and any other services not ancillary to the
production of the printed matter.
Businesses wishing to take advantage of these settlement
terms must provide HMRC with a VAT period by VAT
period analysis for all periods from 1 August 2011 to 31
July 2015.
Next Steps
Businesses involved in direct marketing need to act now.
The first priority must be to determine whether the
business has made supplies that are caught by the R&C
Brief. If they are, it will then be necessary to determine
whether it is possible to take advantage of the transitional
provisions. If so, the business needs to make a
notification to HMRC by 30 November 2015.
If the business is unable to take advantage of the
transitional provisions, it should then consider whether to
accept the terms of HMRC's settlement provisions and,
where appropriate, submit a voluntary declaration in
relation to VAT periods from July 2011.
Businesses which consider that they have accounted for
VAT correctly on supplies or which have a written ruling
from HMRC confirming the VAT treatment need do
nothing. HMRC state that they will investigate these cases
and 'matters will be dealt with in the normal way'.
Comment
The issues covered by this Briefing paper and HMRC's
R&C Brief are complex. HMRC consider that neither the
law nor its policy in this regard have changed but they do
acknowledge that their public guidance lacked clarity.
Affected businesses need to act with some urgency as the
time limit for utilising the transitional arrangements
expires on 30 November 2015.
Grant Thornton can help
If you require any further information or would like to
discuss how Grant Thornton may help your business,
please contact any of the contacts listed below.
Carolyn Risdell Karen Robb
VAT Senior Manager VAT Partner
T 020 7728 3412 T 020 7728 2556
E carolyn.risdell@uk.gt.com E karen.robb@uk.gt.com
Yago Lamela
VAT Senior Manager
T 020 7728 2602
E yago.lamela@uk.gt.com