New Zero Rating of Electronic Publications

There has been considerable pressure on the government to give equivalent VAT treatment for electronic books to the favourable Zero Rate that printed books receive.

Although the EU legislated as long as go as November 2018 to allow member states to apply a reduced rate of VAT to e-publications it was not until this year’s Budget that the government made moves to bring the treatment into line.

Zero Rating of e-publications was scheduled to come into force from 1 December 2020, but in a surprise move the date has been brought forward by seven months and now applies from 1 May 2020.

All e-books and similar digital publications now benefit from a Zero Rate of VAT.  The new rate will benefit sales of both fiction and non-fiction e-books, directories and catalogues, newspapers, journals, periodicals and most digital magazines.

The accelerated timescale has likely been partly prompted by a successful case raised by News Corp, the publisher of “The Times” and “The Sun”, that challenged the existing rules preventing their digital newspapers from receiving the same VAT treatment as their printed papers.

Full guidance from the Revenue is still awaited, but we have now had initial advice as to how this new treatment will apply.  This is available at: https://www.gov.uk/guidance/zero-rate-of-vat-for-electronic-publications.  The Revenue also published Brief 3(2020), which announced the decision.

This change will allow all supplies of electronic books, magazines and similar e-publications to be zero rated from 1 May, but the Revenue has not made public their view of the VAT treatment for similar e‑publications supplied before that date.

The outcome in the News Corp case would seem to suggest it will be possible to make claims to recover VAT that has been overcharged on e-publications for the past four years, but advice should be sought before making such a claim.

We are still awaiting guidance as to how far this ruling extends.  There will be a number of uncertainties regarding websites similar interactive formats for digital publications.  Initially it will be prudent to only apply the VAT Zero Rating to publications that mirror an equivalent paper format.  For other types of publication it may be appropriate to seek advice from HMRC before applying the Zero Rate.

For further advice and assistance with VAT and how this change may affect the treatment of your supplies please contact Alan Rolfe on 02380 461235.