The Upper Tribunal (UT) has ruled that Zipvit Limited was not entitled to reclaim VAT that it argued was “embedded” within postal services provided by Royal Mail.

Zipvit supplies vitamins and minerals by mail order and used Royal Mail’s Mailmedia services to dispatch those goods. It is common knowledge that Royal Mail treated these supplies as exempt from VAT, however, the European Court of Justice decided in TNT Post UK Ltd (C-357/07) that postal services which were individually negotiated were not exempt from VAT – meaning Royal Mail’s Mailmedia services should have been subject to VAT.

Zipvit submitted a claim to HMRC – which was rejected – for the VAT they believed was embedded in the charges. Crucially, no VAT invoice was ever provided by Royal Mail and the UT concluded that they had priced their services on the incorrect assumption that they were exempt from VAT. As such, Zipvit had not borne the cost of VAT and under the circumstances HMRC were not obliged to accept alternative evidence in the absence of the invoices.

This is the lead case in a long running ‘postal services’ dispute and will be a blow to many others who have submitted protective claims. Given the values at stake, we expect Zipfit will seek leave to appeal to the Court of Appeal.