Table of Contents
- 1 What are the benefits of using a smart franking machine?
- 2 Some of the key benefits are outlined below:
- 3 Postage price difference when using a smart franking machine
- 4 VAT liability to take into account
- 5 Blue Ink & Smart Meters
The newer generation of franking machines are known as ‘smart franking machines’ due to their ability to account for VAT. Royal Mail have actually said that you need a smart franking machine if you wish to use any of their services affected by VAT as the machine allows you to reclaim your VAT. The smart technology means all the relevant VAT information will be automatically kept in the franking machine’s system, so your VAT is correctly calculated, stored and reported meaning your business can claim VAT back with no problem at all.
When using older franking machines the machine relies on the operator to type in the correct postage amount however, the Royal Mail does not know which category the postage item falls into and therefore the VAT could easily be miscalculated. The smart technology seen in the newer machines means you don’t have to worry about which items of mail are subject to VAT and which are not as the machine knows and will deal with each one accordingly (we’ll look more at this a little bit later).
In the past, working out VAT was a stressful and often complicated part of using a franking machine. It is unsurprising that mistakes regarding VAT were common and smart franking machines were introduced in order to remedy the mistakes and inconsistencies. A smart franking machine can save a business valuable time and ensure the correct VAT is being paid constantly and consistently. If you are sending mail via services that are VAT liable, you need to use a smart franking machine, this is because from 2012 onwards you are not able to reclaim VAT unless you are using a smart franking machine.
What are the benefits of using a smart franking machine?
A smart franking machine is the newer, shinier and more advanced franking machine on the market. They are strongly and openly recommended by the Royal Mail as they are necessary to handle VAT liable products. A smart franking machine will save you money, has all the great things a regular franking machine but offers enhances services, particularly when it comes to VAT. These machines are sleek, modern and are an asset to a business.
Some of the key benefits are outlined below:
- VAT calculations are quick, accurate and always up to date. A smart franking machine keeps your VAT in check so you don’t have to worry about it, you always pay correctly and reclaiming from HMRC couldn’t be easier.
- Your smart franking machine knows which services are VAT exempt and which are not so you don’t have to try to remember which is which.
- Spending and postage tracking, monitoring and control can be reviewed in detail allowing easier analysis of data and more effective measures to be implemented for increased savings and efficiency.
- Access to additional discounts on top of standard franking discounts e.g. Business Mail Advanced.
As you can see, a smart franking machine has several advantages available on top of the standard financial and time saving benefits a regular franking machine has to offer. The key thing here is that if you are using VAT liable postal services then you need to be using a smart enabled franking machine in order to deal with the VAT correctly as well as be able to reclaim your VAT. Without a smart franking machine, you will not be able to utilise those services.
Postage price difference when using a smart franking machine
The price of postage is the same when using a standard and a smart franking machine, however, you do have access to additional discounts when using a smart machine. While you frank your mail, the smart machine will be silently working away, calculating and creating accurate VAT reports. With all this background work, you will be getting more for your money when using a smart franking machine as oppose to a regular model.
Older machines generally do not have smart technologies so if you are currently looking to buy or rent a franking machine keep this in mind and choose a newer machine in order to experience the most benefits. If you are interested in a model and you are unsure as to whether or not it is smart meter enabled, just ask and the supplier or manufacturer will be able to help. If you are already renting a machine but it is not smart meter enabled, enquire about a possible upgrade in model so you can enjoy the additional advantages of smart franking machines.
VAT liability to take into account
A SMART franking machine helps you by automatically differentiating between the services that require VAT and those that do not. In 2011, EU rules changed meaning a whole host of postal products became liable to VAT that previous were not. Not all services were made liable however, for example 1st and 2nd class mail and standard parcels remain VAT exempt.
The following services are among those that are now liable:
Parcels – products relating to parcel delivery now liable to VAT include:
- Special delivery guaranteed by 9am
- Royal Mail Tracked 24 / 48
- Royal Mail Same day
- If purchased as an additional to a standard rated service, Royal Mail signed for will also be liable.
International – International products headed to EU destination only now liable to VAT include:
- international contract tracked and secure services
- international contract services
Other Products include;
- business mail secure
- do not redirect
- Royal Mail pouch services
- private posting box
These services are just a few of the ones that are now VAT liable. A complete list of products liable to and exempt from VAT is available on the Royal Mail website so you can establish how your business is affected. You may be shaking your head and wondering why I even bothered to reel off those products, well now imagine you are trying to navigate an even longer list to establish how much VAT you need to pay… It can cause headaches just thinking about it, which is why smart franking machines are that much more advanced than their predecessors. A smart franking machine knows which services are exempt or not, all you have to do is record the kind of postage product you’re sending and your franking machine will calculate the rest.
The 4 key UK manufacturers have now ensured their newer models are VAT compatible through smart enabling or their own VAT software, see below for more details:
- Pitney Bowes new machines are SMART enabled and also have the option to monitor postage from their website, the older models have been upgraded through download (if you have an older Pitney Bowes machine contact your supplier regarding upgrade options).
Neopost new machines are also SMART enabled and those with older Neopost machines are advised to contact their supplier regarding ways to track VAT payments.
Frama have also ensured their new machines are VAT compatible, their machines include the FramaOnline2 data centre which has been designed to keep your machine up to date. They also offer upgrades for those with older models for £45, so this may be something worth investigating if you have an older Frama franking machine.
- FP new franking machines can handle VAT online through the FP website and they also offer upgrades on older machines if necessary.
Blue Ink & Smart Meters
New technology recently revealed that blue ink is more effective than the traditional red ink used by franking machines. Due to this, smart meters use blue ink rather than the traditional red ink usually seen to signify a franked mark. The blue ink has been found to be more easily read by a machine and produces a crisper and higher quality mark. The blue ink signifies utilising advanced technology and continuously improving systems in order for the best and most efficient user experience.
Smart Franking Machine Summary
A smart franking machine is essential for businesses who are sending mail that is VAT liable as the technology prevents errors and speeds up the calculation and reporting processes so you don’t have to worry about them. The big VAT changes in 2011 caused a lot of confusion and by simply upgrading to a smart franking machine you could experience simple VAT reclaim and even greater benefits. A smart franking machine keeps communications constant between your business and Royal Mail in order to send the necessary reports. You will be able to find a smart franking machine with ease on the current market, if you’re unsure whether your franking machine is smart enabled, simply ask your supplier!