The Royal Mail
In 2011, Royal Mail caused somewhat of a stir with talks of adding VAT to some of its services. Luckily, many services remained unaffected due to a ruling by the European Court Of Justice, but although only a small number of services are currently subject to VAT, it is looking more and more likely that by 2nd April 2012 further services will be affected and unfortunately these will be the ones used mainly by businesses. Those most hard hit will be non VAT rated or partially VAT rated companies.
However, it's not all bad news and the numerous small businesses relying on the substantial discounts accrued with the use of franking machines can breathe a sigh of relief. When we take a look at the discounts achieved by companies and businesses who utilise franking machines it's little wonder that Royal Mail's talks of VAT caused such a wave of panic. The further changes due to take place in April 2012 are also expected to have no affect on franked mail.
Savings Achieved With Franking Machines
Many businesses utilise franking machines, not just because of the amount of time saved when compared to manually processing mail, but also due to the significant savings made on Royal Mail postage costs.
Below we can see some of those savings achieved in detail and can begin to see that, when those figures start to mount up, franking machines really are one of the most cost effective ways to process large volumes of mail.
For a letter weighing 0-100g, a first class stamp costs 41p, but first class franking costs just 36p giving a 12% saving.
For a second class stamp for the same sized letter you will pay 32p and the franking costs are 25p giving a saving of 21%.
The larger the mail item, the bigger the saving/discount and for a large letter weighing from between 0-100g and 501-750g, first class postage will cost between 66p and £1.87 and the franking costs between 50p and £1.51, offering a discount ranging from 24% to 19% depending on the weight of the mail item.
Second class postage for the same weight range costs 51p to £1.59, with franking prices considerably lower at between 40p and £1.23, with a discount ranging from 27% and 21%.
Packets with a weight of between 0-100g to 751-1000g cost between £1.39 and £3.35 for first class postage and first class franking for the same weight range costs between £1.20 and £2.70, giving a considerable discount of between 19% and 13% depending on the mail item weight.
Second class postage for the same weight range costs between £1.17 and £2.84, with franking costs between £1.00 and £2.18, giving a discount ranging from 23% down to 14%.
It's certainly fair to say that the figures speak for themselves.
Royal Mail Services Unaffected by the VAT Proposals
As well as franked mail, there are numerous other services which are as yet unaffected by the VAT proposals and look set to stay that way even after 2nd April 2012. These services include standard parcels, first and second class stamped, Walksort, Sustainable Mail and Special Delivery/Next Day Delivery (stamped and franked).
Some of the Royal Mail services which are VAT liable include Express and Tracked Services, International Services which will add VAT to EU destinations, Advertising, Catalogues and Magazine Services and Unaddressed/Door to Door Mail.