TNT loses Royal Mail VAT action

TNT will have to continue to pay VAT on its services

TNT Post, the Dutch mail delivery firm, has lost an action at the European Court of Justice to remove the UK Royal Mail's VAT-free status.

TNT had argued that since Royal Mail was privatised, it should no longer enjoy the competitive advantage over its rivals of paying no VAT.

But the court ruled that as the UK's only "universal service provider", the exemption was legally sound.

This means that TNT will have to continue paying VAT on its services.

'Essential needs'

"Royal Mail is obliged to provide a universal postal service including at least one delivery to every address and one collection from every access point every working day at affordable and uniform prices," the judgement said.

The Luxembourg-based court ruled that the Royal Mail's status and obligations had not changed when the postal market was liberalised in 2006.

Therefore, it should not have to pay VAT.

No other service provider was subject to the same obligations, the judges ruled, and so they should not be exempt from paying the tax.

"Royal Mail supplies postal services under a legal regime which is substantially different from that of an operator such as TNT Post. The supplies of services by those two companies are therefore not comparable," they said.

The Royal Mail alone, they added, supplies services that "meet the essential needs of the population."

The court did rule, however, that only universal postal services are exempt from VAT. The tax is due on those that are individually negotiated.