Electronic editions of newspapers and e-books – lastest case news

Background 

When the UK’s zero rate for newspapers was originally introduced, newspapers were supplied as printed publications and no one foresaw that that they would be available on Kindles, tablets and mobile phones in future. HMRC’s position is that prior to 1 May 2020 zero-rating for books, booklets, brochures, pamphlets, leaflets, newspapers, journals and periodicals was limited to physically supplied printed goods. As opposed to e-books and e-newspapers, which are supplies of electronically delivered services - and until 30 April 2020 were therefore standard-rated. 

The First Tier Tribunal (FTT) found that although there was no material difference between the content of the print and digital editions (despite some features only being available online) the zero rate applied only to goods, not electronic services.

The Upper Tribunal (UT) however overturned the FTT decision and ruled that the digital editions of the Times and other News Corp newspapers should be zero-rated. The UT concluded that the VAT Act 1994 should be interpreted in a way that maintained its relevance (the “always speaking” principle). Applying the zero rate to digital newspapers did not extend the scope of the relief (which would not be allowed under EU rules). Nor did it offend the rule that the relief should be construed strictly. This gave rise to a number of claims by other suppliers for overpaid VAT on digital editions. News Corp appealed.

What’s the latest information on the case?

The Court of Appeal has ruled that online newspapers, despite being identical in content to the zero-rated print editions, were subject to VAT at 20% (until May 2020). The court had to resolve two conflicting points. 

• On the one hand, domestic VAT legislation is “always speaking”, and zero-rating should not be denied simply because online newspapers did not exist when the rules were written. 
• On the other hand, the zero rate was subject to ‘standstill’ provisions, and could not be extended under EU law. In the court’s judgment, the language used in the original zero-rating provisions specifically refers to goods, and later changes assumed the relief applied only to goods, whereas online newspapers are digital news services. 

It found that the UT had paid insufficient attention to the wording of the provisions, and the need to construe VAT reliefs strictly, and therefore allowed HMRC’s appeal.

What should you do? 

A lot of money rides on this case. News Corp alone would be looking to reclaim tens of millions of pounds in overpaid VAT, and others will also have claimed, so it seems likely there will be an appeal to the Supreme Court. 

Due to the four year statutory limit on adjusting VAT claims and the length of time that may elapse, if you're affected by this decision, and you haven’t yet made a claim, you should consider doing so in order to protect any over-paid VAT going ‘out of time’. If you have already claimed it will be a case of waiting to see what happens and updating claims regularly.

Where your organisation has purchased e-publications, then it will be necessary to make representation to the supplier, particularly where the VAT charged cannot be reclaimed.

To discuss this case, or any other VAT matters, please do not hesitate to get in touch with your usual Buzzacott VAT contact, or our VAT partner Socrates Socratous.