The Charity Tax Group (CTG) and the Direct Marketing Association (DMA) have both urged HM Revenue & Customs (HMRC) to delay their proposed changes to the VAT on direct mail. HMRC stated last year that they were considering changing the VAT ruling for the printing and distribution of the direct mail fundraising packs sent out by charities in the United Kingdom. Currently, these direct mailing are not subject to the value added tax (VAT) of 20%, but the HMRC said they were reconsidering their tax-free status last October. After discussions between representatives from HMRC, the CTG and the DMA, the decision on the whether or not to apply VAT to these direct mailings was pushed back to April 2015, with guidance on how to correctly pay VAT to be published shortly after.
Many charities have voiced their opposition to the decision, stating that it would significantly increase the costs associated with direct mail fundraising, which is still one of the most profitable ways of collecting donations. However, the CTG seem now to have accepted the decision, and are now focusing their efforts on delaying it so they can help charities fully prepare for the changes.
HMRC said they 'expect such suppliers (charities) to pay VAT correctly from 1st April', but they are yet to publish any guidance on how they are to do so. The chair of the CTG, John Hemming, said that the situation is 'unacceptable', and that his group are calling 'on the government to extend the implemnetation date to allow for full consideration of the guidance.' The DMA have made a similar statement, calling the situation 'intolerable', and asking; how organisations like charities are expected to run their mail activities when they don't know how the new regulation will apply'.
How this will affect the future of direct mail fundraising in the United Kingdom is not yet clear, but without full guidance on how to pay the required VAT on their direct mail campaigns, many charities are left confused and frustrated by the decision.