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Case puts VAT treatment of digital publications in the spotlight

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Since releasing this article there has been an update, please click here for the latest update.

You may be interested to hear of an important VAT tribunal decision (News Corp UK and Ireland Ltd v The Commissioners for HM Revenue and Customs: [2019] UKUT 0404 (TCC)) which relates to the VAT rating of electronic publications. Could this case have an impact on your business?

The Upper Tribunal (UT) has recently overturned the First-tier Tribunal decision in a case regarding the zero rating of electronic publications (the appellant publishes, principally, The Times, The Sunday Times, The Sun and The Sun on Sunday). The UT has ruled that electronic editions of those newspapers qualify for zero rating in the same way as the printed editions. To date, HMRC have taken the view that “e publications” do not qualify for zero rating as these are supplies of services and not supplies of goods and as such HMRC’s current policy is that all electronic publications are standard rated. HMRC policy in this area has widely been considered outdated due to VAT legislation not keeping pace with changes in technology.

Whilst the UT decision only covers newspapers, if unchallenged by HMRC, it is likely to lead to other “e publications”, such as books, magazines, periodicals, newsletters etc also being treated as zero rated.

This ruling could impact on many charities and membership organisations who provide publications to their supporters/members. Such bodies can apportion payments to reflect the zero rated elements such as a printed magazine. This case potentially opens the door for similar apportionment for electronic versions of publications. Going forward, there may be opportunities for refunds of overpaid VAT (both input and output VAT) going back four years.

Whilst we consider it is likely that HMRC will appeal this decision to the Court of Appeal, we wanted to highlight it to you now so that we can begin to discuss the implications of this case with you and how it may be pertinent to your business. We will send you further updates in due course but, in the meantime, if this is something you would like to talk about more, please contact a member of our VAT team, Jane or Dahlia or speak to your usual Mercer & Hole contact.

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