Retail surgery: We’ve heard retailers are claiming back VAT on their delivery contracts. Why is this and can we do it, too?

Hundreds of retailers and other mail order businesses have yet to lodge valuable VAT reclaims with Her Majesty’s Revenue & Customs (HMRC), and delay could be expensive, warns accountant Smith & Williamson.

Any business with individually negotiated arrangements with Royal Mail covering mailing services such as Parcelforce could be in line for a VAT payback. Those involved in large-scale mailings have most to gain. This opportunity was identified on March 31, when HMRC confirmed that it will consider claims from some Royal Mail users going back four years.

Retailers that have used Royal Mail and Parcelforce for deliveries to customers are eligible for a VAT reclaim, but many have failed to do so, says Smith & Williamson VAT director Hannah Dobson.

“My guess is that large and small businesses from all over the country qualify for a VAT refund worth thousands of pounds. But as each day goes by, the amount they can claim is falling due to the four-year capping rules for refunds of VAT,” explains Dobson.

“To maximise their claim, organisations should lodge their request as soon as possible. Every day of delay reduces the potential reimbursement.”

“Organisations which have individual contracts with Royal Mail can treat the amounts paid as VAT-inclusive, which would enable them to claim up to 7/47ths [15%] of the gross cost for periods where the VAT rate was 17.5%.”