Should VAT be charged on e-publications?
In March 2018 the First-Tier Tribunal (FTT) in the case of News Corp UK v HMRC was asked to consider whether digital version of newspapers should be free of VAT in the same way as printed newspapers.
The original decision made by the FTT, was that e-publications were not eligible as they could not be classified under the existing law as ‘goods’, making the point that goods should be tangible in nature.
An appeal was launched with the argument that digital editions of the newspaper titles are still newspapers based on the definition of a newspaper, i.e. for the ‘dissemination of knowledge and democratic accountability by having informed public debate’.
In this respect, it was argued that the means of publication (whether paper or electronic) was irrelevant. It was further argued that that a strict interpretation of the definition was inappropriate as e-content was not in existence at the time the legislation was enacted in 1972.
The Upper Tribunal concluded that the FTT erred in its findings. It agreed that in 1972 the drafter of the legislation could only contemplate the existence of printed matter in its original physical form. It also agreed that leaving aside the manner in which the newspaper is supplied (physical or digital) “the e-reader and print versions are sufficiently similar that the legislative purpose extends to both.”
Impact & Next Steps
The decision means that the Court considers that supplies of e-newspapers (and potentially more widely other e-publications) qualify to be taxed at the VAT zero rate. Given this, there is an opportunity to seek repayment of VAT previously declared on such supplies.
In addition, taxpayers may want to consider the potential impact on future supplies, whilst bearing in mind HMRC are very likely to appeal the decision.
If you require guidance on this matter, please contact Jonathan Main, Indirect tax partner MHA Moore and Smalley.