R Tnt Post Uk Ltd (Claimant) The Commissioners for HM Revenue and Customs (Defendant) Royal Mail Group Ltd (Interested Party)

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
JudgeMr Justice Kenneth Parker
Judgment Date10 December 2012
Neutral Citation[2012] EWHC 3380 (Admin)
Docket NumberCase No: CO/5302/2011
Date10 December 2012

[2012] EWHC 3380 (Admin)




Royal Courts of Justice

Strand, London, WC2A 2LL


Mr Justice Kenneth Parker

Case No: CO/5302/2011

The Queen on The Application of Tnt Post Uk Limited
The Commissioners For Her Majesty's Revenue and Customs
Royal Mail Group Limited
Interested Party

Mrs P Hamilton (instructed by Charles Russell LLP) for the Claimant

Miss Nicola Shaw QC and Mr Michael Jones (instructed by HM Revenue and Customs) for the Defendant

Mr Javan Herberg QC and Miss Emily Neill (instructed by Slaughter and May) for the Interested Party

Hearing dates: 30 and 31 October 2012

Mr Justice Kenneth Parker



This is a renewed application for permission to apply for judicial review. I had refused permission on the papers both on the grounds of delay and of lack of merit of the claim. The issue raised by the claim is narrow, namely, whether the exemption from Value Added Tax ("VAT") conferred by United Kingdom primary legislation in respect of the supply of regulated "access services" by Royal Mail Group Limited, a designated provider of universal postal services, is consistent with EU law. The regulatory and commercial background, however, is somewhat complex and fluid, and needs to be set out in some detail. The resolution of the issue in dispute turns upon the correct interpretation of the judgment of the European Court of Justice in R (on the application of TNT Post UK Ltd) v Revenue and Customs Commissioners ( Case C-357/07) [2009] STC 1438 (" TNT").


The Claimant is TNT Post UK Ltd. ("TNT"), part of the TNT Group which operates in more than 200 countries and employs over 120,000 employees. TNT provides postal distribution services for pre-sorted and unsorted business mail. Its business is the collection, provision of mechanised and manual sorting services (for unsorted mail), processing and delivery by road to a Royal Mail regional depot of its customers' mail. These services are known as "upstream services". The Defendants to the claim are the Commissioners for Revenue and Customs ("the Commissioners"), who maintain that the challenged UK exemption from VAT is compatible with EU law. The interested Party is Royal Mail Group Limited ("Royal Mail"). Royal Mail is the sole universal postal service provider in the UK. Royal Mail's services are provided by means of an integrated national network which services about 29 million addresses six days a week. Letters and other mail are collected by Royal Mail from various locations, namely, about 115,000 pillar boxes, 11,500 post offices and 90,000 business premises. The "access services", which lie at the heart of this claim, mean access by other postal operators or users of postal services to Royal Mail's postal network for the final delivery by Royal Mail, over the last mile or so, from a Royal Mail depot to the ultimate recipient of the mail, sometimes called the "downstream services".


I invited the parties to agree that this application should be treated as a "rolled up" hearing, so that, if I granted permission, I could proceed to decide the claim. However, not all parties acceded to that proposal and, given that prejudice might otherwise arise, I felt that I could not adopt that suggested procedure. In the event I have to decide only whether the Claimant's claim is properly arguable and may proceed to a substantive hearing.

The Relevant Legislative Framework


Article 132(1)(a) of Council Directive 2006/112 EC ("the VAT Directive") exempts from VAT:

"The supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto."


The UK gives effect, or purports to give effect, to the foregoing exemption through the provisions of Group 3 (Postal Services) of Schedule 9 to the Value Added Tax Act 1994. The language and scope of Group 3 has been amended a number of times. However, it is in my view sufficient for determining the present application to set out the terms of the current exemption resulting from section 22(2) Finance (No 3) Act 2010 which took effect in relation to supplies made on or after 31 January 2011 and was subsequently amended by the Postal Services Act 2011 (Consequential Modifications and Amendments) Order 2011 (S1 2011/2085), which took effect on 1 October 2011:

"1. The supply of public postal services by a universal service provider.

2. The supply of goods by a universal service provider which is incidental to the supply of public postal services by that provider.


(1) …

(2) Subject to the following Notes, "public postal services", in relation to a universal service provider, means any postal services which the provider is required to provide in the discharge of [a specified condition].

(3) Public postal services include postal services which a universal service provider provides to allow a person access to the provider's [postal network (within the meaning of section 38 of the Postal Services Act 2011) and which are required to be provided by a specified condition].

(4) Services are not "public postal services" if –

(a) the price is not controlled by or under [a specified condition], or

(b) any of the other terms on which the services are provided are freely negotiated.

(5) But Note (4) does not apply if [a specified condition] requires the universal service provider to make the services available to persons generally –

(a) where the price is not controlled by or under [the condition], at the same price, or

(b) where terms are freely negotiated as mentioned in Note (4)(b), on those terms.

[(6) In this Group "specified condition" means a designated USP condition, a USP access condition or a transitory condition under paragraph 5 of Schedule 9 to the Postal Services Act 2011 which is imposed only on a universal service provider.]

(7) Any expression which is used in this Group and in Part 3 of the Postal Services Act 2011 has the same meaning in this Group as in that part."


The Notes to what is now Group 3 (Postal Services) are intelligible only by reference to the Postal Services Act 2011 ("the Act"). Under section 29 of the Act OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service. Under section 30 OFCOM must by order (a "universal postal service order") set out a description of the services that they consider should be provided in the United Kingdom as a universal postal service and the standards with which those services are to comply. A universal postal service must, as a minimum, include each of the services set out in section 31 (as read with sections 32 and 33) of the Act. OFCOM has made on 26 March 2012 a universal postal service order: see the Postal Services (Universal Postal Service) Order 2012 S1 2012 No. 936, which came into force on 1 April 2012 ("the Order").


By section 35 of the Act OFCOM may designate one or more postal operators as "universal service providers". Royal Mail has been uniquely so designated. By section 36 of the Act OFCOM may impose a designated USP (universal service provider) condition on a universal service provider. By a statutory notification dated 27 March 2012 ("the notification") OFCOM has imposed, with effect from 1 April 2012, designated USP conditions on Royal Mail as universal service provider. The conditions, which are set out in Schedule 1 to the notification, are detailed and comprehensive.


It is common ground in this application that the specific services with which I am concerned do not, on strict analysis, fall within the description of services set out in the relevant Order; and, consequently, none of the designated USP conditions that are set out in Schedule 1 to the notification and that are imposed on Royal Mail by the notification relate to those specific services. As a plain matter of statutory interpretation, therefore, the services with which I am concerned are not, strictly speaking, within the definition of universal postal services.


However, the specific services do fall within the regulatory regime. By section 38 of the Act OFCOM may impose a USP access condition on a universal service provider. Such a condition requires the provider to give access to its postal network (that is, the systems and all the resources used by the provider for the purpose of complying with its universal service obligations) to other postal operators or users of postal services. It is convenient at this point to set out section 38 of the Act in full:

"38 USP access conditions

(1) OFCOM may impose a USP access condition on a universal service provider.

(2) A USP access condition is a condition requiring the provider to do either or both of the following—

(a) to give access to its postal network to other postal operators or users of postal services, and

(b) to maintain a separation for accounting purposes between such different matters relating to access (including proposed or potential access) to its postal network as OFCOM may direct.

(3) The provider's "postal network" means the systems and all the resources used by the provider for the purpose of complying with its universal service obligations (and, accordingly, includes arrangements made with others for the provision of any service).

(4) OFCOM may not impose a USP access condition unless it appears to them that the condition is appropriate for each of the following purposes—

(a) promoting efficiency,

(b) promoting effective competition, and

(c) conferring significant benefits on the users of postal...

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