VAT on digital publications

It’s not often that a VAT case catches peoples’ imagination, but the News Corp win at Upper Tribunal is generating a lot of excitement among VAT specialists and publishers.

The issue is whether electronically delivered newspapers should carry VAT at 20% or 0%. News Corp won its case to zero rate digital versions of: The Times, The Sunday Times, The Sun, and The Sun on Sunday, by arguing that the digital content was essentially same as in the printed versions.

This ruling will allow News Corp to reclaim overpaid VAT on those electronic publications in past years. As this is a decision at the Upper Tribunal it sets a legal precedent, so HMRC is bound to consider claims made by other publishers who were not involved in the case.

VAT specialists are now approaching publishers who produce paper and an electronic versions of the same product, including magazines and books, to persuade them to submit protective claims for VAT paid in the last four years. This is the statutory period for reclaiming VAT.

To fall within zero-rating as per News Corp judgment the digital publication would need to share the following characteristics in common with its print-based stable-mate:

• the content must be fundamentally the same or very similar
• must be an edition-based publication (not rolling news)
• updates to the digital versions must be relatively minor
• additional content not be provided in newsprint must be a relatively minor aspect of the digital editions

HMRC is appealing the News Corp case and is unlikely to pay out any refunds until this litigation is concluded. However, if News Corp do win eventually, any overpaid VAT not protected by a claim will be lost forever.

It’s a difficult decision to make whether to make a claim or not, but if you have any queries on the above please contact our office.

Written by the Tax Advice Network