The Sixth VAT Directive exempts ‘public postal services’ from VAT on the basis that they represent activities in the public interest. The postal directive began the process of the gradual liberalisation of the postal services market.
In 2001, Royal Mail was designated the only universal postal service provider in the UK. From 2006, the postal market in the UK was fully liberalised, without affecting the status and obligations of Royal Mail. The conveyance by Royal Mail of postal packets and letters is not subject to VAT.
TNT Post collects, sorts and delivers the mail to one of Royal Mail’s regional depots, Royal Mail then distributes that mail. VAT is charged on TNT’s services.
TNT brought an action before the UK High Court calling into question the validity of the exemption from VAT of Royal Mail’s postal services, submitting that their services are the same. That court requested from the ECJ an interpretation of the expression ‘public postal services’ in the context of a fully liberalised market and the extent of the VAT exemption for those services.
The ECJ held that ‘public postal services’ must be regarded as operators, whether public or private, who undertake to supply postal services which meet the essential needs of the population. However, not all the supplies of services by the public postal services are exempt, supplies of services for which the terms have been individually negotiated are excluded from the exemption.
The full ECJ judgment is available http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&numaff=C-357/07