The Independent: Royal Mail faces threat of VAT charges on business contracts

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Written by David Prosser

Royal Mail already faces opposition to its VAT exemption within the UK, with bodies such as the Adam Smith Institute, the free-market think tank, calling for its abolition.

"The Post Office is uniquely exempt from paying VAT on its services, as its would-be competitors have to," Madsen Pirie, the president of the Adam Smith Institute, said last month. "This means that a rival has to be 15 per cent more efficient to compete effectively – most markets are won or lost on much smaller percentage margins than that."

In theory, Royal Mail could be forced to introduce VAT charges from January, when the tax rate returns to 17.5 per cent from the 15 per cent concessionary rate introduced by Alistair Darling, the Chancellor of the Exchequer, on a temporary basis a year ago as the UK slipped into recession.

Published in The Independent here.