European Court of Justice has told Royal Mail it must incorporate VAT in its private deals.

Businesses may start using alternative parcel delivery services to those offered by Royal Mail after a court ruled it cannot be exempt from VAT on private contracts.

European law currently states that publicly-owned postal service organisations do not have to pay the charge, as they provide a universal service.

However, the European Court of Justice ruled that the exemption cannot be applied to private contracts Royal Mail has with various firms, in a case brought forward by rival parcel delivery provider TNT.

TNT claimed that the VAT relief was anti-competitive and unfair on private enterprises which offer similar services.

Alan Pearce, a partner at the accountancy Blick Rothenberg, told the Independent that some of the organisation's customers are VAT-registered, so they will be able to reclaim the tax.

"[However], for many potential clients in sectors where that is not the case, this could be a real threat to Royal Mail's ability to continue winning their business," he added.

Using alternative parcel delivery firms can be better than turning to Royal Mail, as these companies can offer a more personal service and can be cheaper in many cases, Sandra Patterson, managing director at Boxby, recently wrote in Realbusiness.co.uk.

Written by Mark Moore



Article Added: 17/11/2009 16:33:47