CLAIMANTS IN THE ROYAL MAIL GROUP LITIGATION v ROYAL MAIL GROUP LIMITED

The EU VAT exemption for postal services turns on whether the supplier acts as the public postal services, rather than on whether each service is confined to a narrow traditional postal core. Services mandated and price- or quality-regulated in furtherance of a public postal mission may qualify, including business-oriented services and services outside the domestic designation of the universal service. Individually negotiated commercial services remain outside the exemption. Where an exempt postal service is combined with a taxable add-on, the VAT analysis requires the ordinary fact-sensitive assessment of single or multiple supplies and, for a composite supply, its predominant nature.

This group litigation concerned claims by business and other users of Royal Mail services. The claimants alleged that six Sample Services had been wrongly treated as VAT exempt under domestic law during the Relevant Period.

The preliminary issues were whether the Sample Services were exempt under Article 132(1)(a) of the Principal VAT Directive and whether Royal Mail was an emanation of the State for the purposes of relying on EU law.

1. The Sample Services, save for Door-to-Door, were exempt from VAT during the Relevant Period. The governing test was whether Royal Mail supplied them as the public postal services acting as such, in its capacity as an operator undertaking to provide all or part of the universal postal service. This was the proper reading of TNT Post and Whistl.
2. The dissociable services language originating in Corbeau concerned private-law commercial or express-mail arrangements whose terms were substantially determined by market conditions. It did not exclude all business-oriented services or every service containing added value. Article 12 of the Postal Services Directive contemplated special tariffs for businesses and bulk mailers within the universal service.
3. Royal Mail acted as the public postal services because the Sample Services were mandated and subject to price and quality controls under the Licence or its regulatory equivalents. The regulatory structure served the public interest by securing continued access to services at affordable prices.
4. Alternatively, the Sample Services fell within the Article 3 universal service. They were permanently provided, subject to quality standards, available across the territory, price controlled and available to all users. Domestic characterisation was not decisive. Licensing conditions and volume discounts did not by themselves remove services from the universal service.
5. The reasoning in Deutsche Post could not be transposed mechanically into the VAT context. A taxable add-on did not automatically deprive the main service of exemption. The treatment of any combined supply required the ordinary VAT analysis of separate or composite supplies and, where composite, its predominant nature. That issue was left open.
6. Royal Mail was an emanation of the State before 15 October 2013 because it was State owned and subject to State control. After privatisation it remained an emanation of the State insofar as it continued to provide single-piece franking under DUSP 1.6(a) and (b).

First-instance determination of preliminary issues in group litigation. The judgment records earlier decisions concerning relief, including [2020] EWHC 97 (Ch) and [2021] EWCA Civ 1173.