The European Court of Justice (ECJ) has confirmed that the universal postal service provided by Royal Mail should be exempted from VAT. TNT Post brought an action before the High Court of England and Wales, calling into question the validity of the VAT exemption granted to Royal Mail’s postal services. TNT Post submitted that their services are the same as those provided by Royal Mail but are subject to VAT. The High Court asked the ECJ for an interpretation of the expression “public postal services” in the context of a fully liberalised market and the extent of the VAT exemption for those services.
The Sixth VAT Directive exempts “public postal services” from VAT on the basis that they represent activities in the public interest. In 2001, Royal Mail was designated the only “universal postal service” provider in the United Kingdom. Under its license, Royal Mail is obliged to provide a universal postal service, which means including at least one delivery to every address and one collection from every access point every working day, at affordable and uniform prices. Royal Mail's status and obligations did not change when the postal market was liberalised in 2006.
The ECJ declared that public postal services must be regarded as operators that undertake to supply postal services that meet the essential needs of the population. The ECJ therefore ruled that Royal Mail supplies postal services under a legal regime different to the one that applies to TNT Post. The ECJ did rule, however, that only universal postal services are exempt from VAT; VAT is still due on those that are negotiated individually.