VAT on non-denominated postage

VAT on non-denominated postage

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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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Portia profile image
By Portia Nina Levin
24th Apr 2015 15:54

(No subject)

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Replying to Moonbeam:
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By jwylie
18th Apr 2015 12:54

Thanks for your reply. I am selling them for postage (as opposed to for philatelic interest) and they come in packs of 12 or 100.

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Replying to Moonbeam:
RLI
By lionofludesch
19th Apr 2015 10:46

NVI

Portia Nina Levin wrote:

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.

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Replying to Amy-Accountant:
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By DMGbus
19th Apr 2015 11:30

NVI stamps - speculative buying and selling

lionofludesch wrote:

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.

[/quote]

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.

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Replying to Amy-Accountant:
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By jwylie
20th Apr 2015 14:23

Post office closures

lionofludesch wrote:

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.

There has been a huge programme of post office closures recently, so we find that some people, particularly in rural locations, are willing to pay a small premium to the current price for the convenience of buying online. 

Since the post office cost of NVI stamps is variable (and they have no "face value" as such), my understanding based on the posts so far is that I should therefore account for VAT on the premium to the post office price for the NVI stamps at the time of the sale (rather than the current price).

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By DMGbus
18th Apr 2015 19:17

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). 

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RLI
By lionofludesch
19th Apr 2015 11:43

Yes but ....

The OP clearly says he's selling them for more than the current price of the stamps from Royal Mail.

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Portia profile image
By Portia Nina Levin
24th Apr 2015 15:55

(No subject)

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RLI
By lionofludesch
20th Apr 2015 12:40

Relevant

I do apologise, Portia.

I agree that there may be further relevant information to disclosed.

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RLI
By lionofludesch
21st Apr 2015 11:48

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.

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