What is a Smart Franking Machine? A Complete Guide
A smart franking machine is able to identify different types of mail in order to ascertain whether VAT is applicable. When using a smart franking machine, you frank your mail at a price that is inclusive of VAT. If you are using a Royal Mail service that is exempt from VAT, as many of them are, the information from the machine can be used to generate a VAT invoice so that you can claim it back from HMRC.
Put simply, a smart franking machine is able to make sure you don’t end up paying more than you need to.
But what’s the difference between a smart franking machine and an old-style franking machine, and why are they necessary?
Postal services and VAT
Changes to the way VAT is charged on Royal Mail services began to be introduced during 2011, and by 2nd April 2012 the following services were among those that are liable to VAT*:
– Parcel despatch (including Special Delivery and Sameday)
– Marketing services (including Advertising Mail and Door to Door)
– Publishing (previously known as Pressstream)
– General Correspondence (including Business Mail)
– Inbound Mail (including PO Box)
However, many services – including many of those used for franking – are still VAT exempt. The following services are NOT liable to VAT*:
UK 1st and 2nd class stamps (stamps, online and franking)
Standard parcels
Keepsafe
Airmail
Surface Mail
*These lists is not exhaustive. Full lists of VAT liable and VAT exempt services are available at http://www.royalmail.com/information-vat-and-postal-services
Why might this be a problem for users of franking machines?
With an old-style franking machine, the user keys in an amount for each item to be franked, which means that Royal Mail would not able to identify the product, i.e. Parcel despatch which is VAT liable, or UK 1st class which is VAT exempt, and therefore would be unable to pay HMRC the correct amount of VAT. This in turn would leave the user unable to reclaim the VAT on their VAT return.
A smart franking machine can make the necessary distinctions, and the information the machine provides is used to create a VAT invoice so that although the user has to pay a VAT-inclusive price in the first instance, it can be claimed back from HMRC.
As of April 2nd 2012, you need to have a franking machine with SMART capability (also known as a smart franking machine) in order to reclaim your VAT.
How do I know if my franking machine has a SMART capability?
Franking machine manufacturers were informed of these changes in January 2011, so if you purchased your machine after this date you can be confident that it is SMART enabled. In actual fact, many machines that were produced before this date are also smart franking machines, or they either have a scale or are linked to one which allows them to weigh an item and select a service (i.e. Parcel despatch or UK first class), which makes them very easy to modify. So even if you have a pre-2011 franking machine, it is possible that you will not need to upgrade, or that your machine will simply need to be modified slightly.
Upgrading franking machines so that they are SMART-enabled
The leading franking machine suppliers all have machines that are either SMART-enabled or smart franking compliant.
……………………………………………………………………………………………………………………………….
Pitney Bowes
All current and many non-current franking machines are SMART-enabled. Pitney Bowes claims to have 75% of the smart franking machine market. The following Pitney Bowes machines are smart franking compliant:
DM50 / DM55
DM100i
DM125i
DM150i
DM175i
DM200i
DM160i
DM220i
DM300c
DM400c
DM475C
DM400
DM500 / DM575
DM800 / DM900 / DM1000
Connect+ Series
……………………………………………………………………………………………………………………………….
Neopost UK
All current IS range franking machines have SMART technology built in. Any older IS machines are eligible for a free upgrade. The following Neopost UK machines are smart franking compliant:
Autostamp 2 (Not Autostamp / IJ25)
IS240
IS280
IS330
IS350
IS420
IS430
IS440
IS440
IS460
IS480
IS5000
IS6000
……………………………………………………………………………………………………………………………….
Frama
An upgrade service is available for any non-current machines. The following Frama machines are all smart franking compliant:
Mailmax*
Ecomail*
Officemail*
Accessmail*
Matrix F2L
matrix F4
Matrix F4L
Matrix F6
Matrix F6L
……………………………………………………………………………………………………………………………….
FP
Customers can visit the FP website for an online VAT solution form. The following FP machines are all smart franking compliant:
Mymail
Optimail 25 / 30 / 35*
Ultimail*
Centormail
*A software update may be needed to make the machine smart-compliant
From red to blue
Another recent development in the use of franking machines has been the shift from red ink to blue ink on franked mail from new smart franking machines. After careful research, it has been discovered that blue ink offers an improvement in mail machine readability. Leading franking machine suppliers like Frama and FP are leading the gradual migration from the use of red ink to blue ink on their smart franking machines, promising enhanced print quality and a better clarity of impression.
List of smart-compliant machines from:
http://www.mailcoms.co.uk/smart-franking-machines-smart-compliant-machines-models/