I run a VAT registered e-commerce business selling office products. We have recently started selling mint, no-value indicated (NVI) first and second class stamps which are valid for postage and we are achieving prices above the price that these are sold in the Post Office. The HMRC position on VAT on stamps valid for postage is set out here:
https://www.gov.uk/government/publications/vat-notice-7018-postage-stamp...
Section 2.3 states: "If you sell unused United Kingdom or Isle of Man stamps that are valid for postage no VAT is chargeable if you sell them at or below face value. However, you must account for VAT at the standard rate on any amount by which the price you charge exceeds their face value."
The whole point of NVI stamps is that they do not have a value written on the face, so I was wondering how I should account for VAT on these sales, if at all?
Thanks in advance for any light you might be able to shed on this!
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NVI
They are shown on their face as being first and second class stamps. Their value is the cost of a first and second class stamp.
I do not think that matters though, because you are not just selling them as stamps. Do they not come in some sort of presentation pack?
Royal Mail call them NVI (No Value Indicator) stamps because there's no price on the stamps. They indicate the service, not the value. First class stamps cost 63p. The same stamp cost 62p a month ago. You can still use the 62p (or, indeed, 60p or even 46p) stamp to get a 63p service. I found a small batch of 46p stamps the other day which will still be good for first class postage.
However, I'm wondering myself why people would buy something at a price exceeding the price they would pay at the local post office or newsagent and I suspect there's some key piece of information missing.
NVI stamps - speculative buying and selling
Royal Mail call them NVI (No Value Indicator) stamps because there's no price on the stamps. They indicate the service, not the value. First class stamps cost 63p. The same stamp cost 62p a month ago. You can still use the 62p (or, indeed, 60p or even 46p) stamp to get a 63p service. I found a small batch of 46p stamps the other day which will still be good for first class postage.
However, I'm wondering myself why people would buy something at a price exceeding the price they would pay at the local post office or newsagent and I suspect there's some key piece of information missing.
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I believe that the NVI stamps are bought prior to a price increase, held in stock, then later sold at full market value (ie. at the later [higher] current postage value). That's where the profit comes in, and quite a lot more than the 5% usual gross margin that I've seen in recent years earned by retailers of postage stamps. The end buyer would only be able to buy elsewhere at current full postage rate price, I don't expect the seller is selling at more than current postage rate.
Now, if Royal Mail were to unexpectedly reduce the postage rate then the speculative buyer would lose money as they clearly couldn't sell at more than current postage rates.
NVI stamps value appreciation
I can appreciate the problem.
The stamps are bought when (for example) a postage of the NVI stamp might have been (say) 40p at that time a year or two as go and over time the current cost of such a stamp might become 53p.
So selling at 53p is more than cost 40p and the valid question is "is VAT due on the 13p margin?" which is much higher than the 5% gross margin that I've seen retailers normally attain on postage stamp sales in the past.
As the rules appear to be silent on this point [appreciation in postage value because of price increases not specifically addressed] and the inference is that sold purely for use as postage (at current useable [=face] value) I suggest that the sale is not liable to VAT.
Would be different if sold as philaetic sets (ie. for collectors rather for use on envelopes as payment for postage).
Yes but ....
The OP clearly says he's selling them for more than the current price of the stamps from Royal Mail.
Relevant
I do apologise, Portia.
I agree that there may be further relevant information to disclosed.
Congratulations
Well, congratulations on finding yourself a niche market. Royal Mail Direct would sell them at face value - provided you buy 100 of any one denomination - but obviously people will pay a premium for convenience.
Yes - VAT on excess over the current value would be a defendable position. Presumably that was HMRC's intention, even if it was poorly expressed.