VAT on Electronic Publications

What is the difference between printed and online publishing for VAT purposes now?

Physical books, newspapers or similar printed items are zero-rated for VAT purposes, whereas the supply of the same online products are standard-rated.   However, this could all change 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.

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 had not taken advantage of this permission and the supply of content electronically remained standard-rated.

Why could this change?

This is all due to 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. 

What should you do if you supply e-publications?

This new ruling means the possibility of using a judicial “tool of construction”.  This applies not only to digital newspapers but to many other forms of digitally supplied literature too.

Businesses which purchase electronic 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.