In a judgment handed down earlier this month (47 page / 890KB PDF), the First-Tier Tribunal ruled in favour of HM Revenue & Customs (HMRC) in deciding that digital newspapers should not be excluded from VAT as they are “services” rather than “goods”.
The case was brought by News Corp UK & Ireland, which publishes The Times, The Sunday Times, The Sun and The Sun on Sunday. All four titles have both print and digital editions.
In 2015 and 2017 HMRC said the digital editions did not count as “newspapers” and therefore they should not be zero-rated for VAT.
The court agreed with the company that the digital editions of the publications had similar characteristics to the print editions and that readers consumed the digital content in a similar way to the print content. However both parties agreed that the supply of the digital editions to readers should be considered as the supply of services.
News Corp submitted that zero rating for newspapers was to enable the dissemination of knowledge and to further the democratic process, and that this was as true of the digital editions as the print. HMRC argued that previous case law showed that a distinction should be made between the supply of goods and the supply of services.
The judge agreed, saying that the VAT legislation which permitted a zero rating for printed newspapers applied only to the supply of goods, and that extending the definition was not possible.
“The digital editions of the titles, which constitute a supply of services, are simply not within the zero rating provisions and the scope of those provisions cannot be enlarged by the application of a principle of interpretation, such as that of fiscal neutrality,” the tribunal said.
Under the Principal VAT Directive EU member states may apply a reduced rate of VAT to printed publications such as books, newspapers and periodicals. However, digital publications must be subject to the higher rate, with an EU minimum standard rate of 15%.
Last year a European Parliament committee backed plans that would allow member states to reduce VAT on e-publications