Upper Tribunal confirms e-newspapers qualify for zero rating
News Corp UK & Ireland who publish the Times and Sunday Times have been successful in their appeal that digital versions of newspapers should be zero rated for VAT. HMRC have always stated that online books, periodicals and other publications have been subject to the standard rate of VAT.
News Corp UK had previously lost at First Tier Tribunal which found that although digital versions were fundamentally the same or very similar to printed versions, the digital version was a supply of services rather than goods and therefore the zero rated schedule in the VAT legislation did not apply as it was confined solely to goods.
News Corp appealed to the Upper Tribunal, which concluded that the FTT had reached the wrong decision in determining the legislation limited zero-rating to goods only. In addition, it accepted the News Corp argument that electronic versions of newspapers shared the same purpose and characteristics as a hardcopy newspaper namely ‘to promote literacy, the dissemination of knowledge and democratic accountability by having informed public debate’.
UT concluded that the purpose of the legislation was neutral in terms of how the newspaper was supplied and that the print and digital versions were similar enough that the original VAT legislative covered both.
It is not yet known whether HMRC will appeal the case or whether other electronic publications not currently in receipt of VAT zero rating will fall within the definition.
If your organisation has incurred VAT on digital publications this is likely to be irrecoverable so this decision could be worth a significant amount to your organisation. The first step will be to quantify the VAT incurred on such supplies over the past four years and then, where relevant, to submit a protective claim. We are happy to give you a call to discuss further and outline the steps that need to be taken to protect the historic claim for the last 4 years. We would suggest that this is done as soon as possible to protect the earlier claim periods.
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