VAT: HMRC provide guidance on digital publications
Newsletter issue - March 2020.
HMRC have published Brief 1 (2020): VAT liability of digital publications - Upper Tribunal in News Corp and Ireland Ltd, which confirms that HMRC's VAT treatment of supplies of digital newspapers and other publications has not changed.
Supplies of newspapers are zero rated under UK legislation. HMRC's policy is that the zero rate only applies to the sale of printed matter (that is, supplies of goods). Therefore, the sale of digital newspapers (which are services) has always been treated as standard rated.
In an appeal against the first-tier tribunal (FTT) decision in News Corp UK & Ireland Ltd [2018] TC 06385, the Upper-tier Tribunal (UT) recently ruled in favour of the appellant and reversed the original decision, instead concluding that a digital edition of a newspaper can be zero rated under VATA 1994, Sch. 8, Grp. 3, item 2.
The UT held that:
- group 3 of Schedule 8 is not limited to goods and can include services (such as digital publications);
- the News Corp digital newspapers were essentially the same or at least very similar to the corresponding printed newspapers, fulfilling the same legislative purpose, and falling within the same category of items (or 'genus of facts') that UK legislation has always zero rated;
- the domestic legal principle known as the 'always speaking' doctrine is engaged (essentially, that legislation in certain circumstances should reflect and keep up to date with technological advances); and
- the supply of the digital newspapers in dispute fell to be zero rated within Item 2 (notwithstanding that they did not exist when the zero rates were introduced).
Required action
HMRC have been granted permission to appeal the Upper Tribunal decision to the Court of Appeal.
HMRC have confirmed that as their policy has not changed, any claims made in reliance of the decision in News Corp will be rejected.
Where an organisation considers that the decision in News Corp applies to its own supplies of digital publications it should provide HMRC with full details in writing, including:
- a full description of the supplies for which the claim is being made and which item of Group 3 of Schedule 8 the supplies fall;
- clear reasons why it is considered that the claim should be treated in the same way as the supplies in the News Corp UT decision;
- a breakdown of the amounts of overpaid VAT being claimed by prescribed accounting period and the method by which they have been calculated.
Further information can be found in HMRC Brief 1/20.