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Digital publications and VAT

6th January 2020

Digital publications and VAT
In what can fairly be described as a landmark decision, the Upper Tribunal has decided that digital editions of News Corp’s newspapers, such as the Times and the Sun should be zero-rated.

This is a major defeat for HMRC, who it must be presumed will appeal the decision to the Court of Appeal and is based on the “always speaking” principle of statutory interpretation. This principle means that when a court gives a decision it is not changing the law, it is simply saying how the law should always have been interpreted.

In this case, the Court held that since the original purpose of the zero-rate for printed matter was to promote literacy, the dissemination of knowledge and democratic accountability by having informed public debate there was no reason that the zero-rate which applies to hard copy publications should not be extended to digital versions of the same item.

This was notwithstanding that the zero-rate is an exception to the normal rule, and that it is a standstill provision introduced on accession to the then EEC in 1973 which could not be extended to things which had not even be contemplated over 40 years ago. 

What is also striking is that the zero-rate has traditionally applied to supplies of goods, and it was common ground that digitised publications are a supply of services and moreover the Court held that recent EU law allowing for digital publications to be treated in the same way as hard copy publications was irrelevant as that law referred to reduced-rates of VAT, and that the zero-rate was not a reduced rate. 

For now, organisations who produce digital publications have a decision by a Court of record which says that such publications can be zero-rated but should be mindful that the decision is likely to be appealed.

For more information please contact Phil Salmon or your usual haysmacintyre contact.

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