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Zero-rating of electronic publications

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HMRC has announced in Revenue & Customs Brief 3/2020 that the planned extension of zero-rating to electronic publications has been brought forward from 1 December 2020 to 1 May 2020. The zero-rating will apply to electronic versions of books, newspapers, brochures, journals and leaflets. Zero-rating will not cover audio books or publications which are predominantly advertising.

Suppliers of such publications have only been given one day’s notice of the change in liability and will need to respond quickly and assess which of their publications may benefit from the relief.

The VAT treatment of electronic publications has been a contentious issue at both UK and EU level for many years. A number of cases sought to extend the provisions of the VAT Directives allowing reduced rates of VAT on books etc. to electronic versions, unsuccessfully. In the UK, the separate zero-rating rules were recently successfully challenged in respect of electronic versions of newspapers (see News Corp UK and Ireland v HMRC [2019] UKUT 404).

The EU eventually introduced provisions enabling member states to extend the reduced rate provisions to electronic publications. Council Directive (EU) 2018/1713, which came into force in December 2018, allows member states to extend their reduced or zero rates to supplies of electronic versions of publications. The UK announced in the March 2020 Budget that it had decided to exercise this option to extend zero rating to supplies of specified electronic publications.

Against the background of the Covid-19 pandemic and the need for people to stay at home, the government has made the decision to bring forward the change in liability of electronic publications. Accordingly, with effect from 1 May 2020, qualifying supplies of e-publications will be zero-rated.

VATA 1994 Sch 8 Group 3 currently provides for the zero rating of printed matter. Legislation has been introduced by statutory instrument (VAT (Extension of Zero-Rating to Electronically Supplied Books etc.) (Coronavirus) Order, SI 2020/459) to amend Group 3. Subject to certain exclusions, the legislative changes will zero rate supplies of e-books, e-booklets, e-brochures, e-pamphlets, e-leaflets, e-newspapers, e-journals and e-periodicals (including magazines) as well as electronic versions of children’s picture and painting books.

The exclusions are for e-publications that are wholly or predominantly devoted to advertising or to audio or video content, which remain standard rated. Also excluded are ‘plans or drawings for industrial, architectural, engineering, commercial or similar purposes’.

Where a transaction consists of more than one element, for example where a zero-rated e-publication is supplied together with something else, it will be necessary to determine whether the supplier is making a single supply or multiple supplies to determine the correct liability. For example, a supplier makes a single supply where one element of the supply is the principal element to which all other elements are ancillary. The supplier makes multiple supplies where the various elements of the supply are distinct and independent. Where both elements are zero-rated (for example, a subscription to both a printed journal and an electronic version of the journal), then the subscription will be zero-rated. However, where a business offers to sell an audio book and a printed book together at a discounted price there will normally be two separate supplies: one of a standard rated audio book and the other of a zero-rated book.

Legislation was introduced in FA 2011 to counter schemes entered into by businesses that artificially split supplies so that they could benefit from the zero rate for printed matter. The new legislation will ensure that businesses will not be able to enter into similar schemes when e-publications become zero-rated.

The decision to bring forward the relief will be welcome news to businesses supplying electronic publications. However, the government has given almost no notice of the change, and this will mean that affected businesses will need to consider immediately whether the products they supply come within the scope of the zero-rating rules. If so, changes will need to be implemented to their systems to accommodate the change. Further guidance can be found on HMRC’s website (see

Separately, businesses may wish to consider if they are affected by the decision in News Corp and may be able to reclaim overpaid output VAT on publications. That decision was the UK zero-rating provisions always applied to electronic newspapers such that output VAT was not due. However, HMRC has appealed the decision, and it may be necessary to await the outcome of the appeal to the Court of Appeal to determine whether a reclaim will be successful.

Issue: 1486
Categories: In brief