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Markel Tax

09 Jan 2020

VAT: zero-rating newly available for e-publications

Has the Upper Tribunal delivered a Christmas present to the UK?
 
The supply of a physical book, newspaper or similar printed matter is zero-rated for VAT purposes, whereas the provision of the same online is standard-rated.  That has all changed thanks to a decision made by the Upper Tribunal on 24 December 2019.  Suppliers of electronic literature should now consider whether their supplies are zero-rated in the same way as the physical printed equivalent would be. 
 
It is true that in 2018, the EU adopted a VAT Directive permitting EU member states to tax the supply of electronic publications at the same rate of VAT as the printed equivalents.  However, the UK has not taken advantage of this permission and the supply of content electronically remains standard-rated.
 
In the case of News Corp UK & Ireland Limited ([2019] UKUT 0404 (TCC), decided 24 December 2019), News Corp argued that its supply of its newspaper electronically was still the zero-rated supply of a newspaper in accordance with Item 2, Group 3, Schedule 8, VAT Act 1994.  HMRC argued that it was a supply of electronic services and therefore standard rated.  The judge decided that there was no material difference and that the electronically supplied newspaper should be zero-rated.  The Tribunal also appeared to indicate some restrictions as to what might, or might not, be acceptable as an electronic equivalent to a newspaper.  The exciting possibility is that this ruling, using a judicial “tool of construction”, applies not only to digital newspapers but to many other forms of digitally supplied literature too. 
 
This will affect a wide variety of taxpayers.  Businesses which purchase digital publications but which have been unable to recover all the VAT incurred (such as banks, insurers, financial advisers, educational establishments, charities, health and welfare providers and so on) should consider approaching their suppliers and requesting a refund of the overcharged VAT.  Suppliers of digital publications should consider whether to zero-rate future supplies, how to handle VAT charged on digital publications supplied in the past four years and how to respond to claims made by their customers.  Such suppliers should consider making claims to HMRC in respect of overpaid output tax. 

For further assistance with zero-rating electronic publications including making claims or any other VAT issues, please contact Kevin Hall at Markel Tax on 020 3815 8999 or via e-mail kevin.hall@markel.com
 
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04 Dec 2019

Canal Street Productions Ltd / Helen Fospero – IR35