London, UK

e-Publications – Post-EU Evolution in the UK VAT System

By Steve McCrindle, Haines Watts

The UK has always zero-rated printed matter, including books, booklets, brochures, pamphlets, leaflets, newspapers, journals and periodicals (which include magazines), and children’s picture and painting books. It was HM Revenue & Customs’ (HMRC) policy that zero-rating of VAT only applied to ‘goods’ and not the e-book equivalent, which is a ‘service’. This had been the status quo in the UK for some time.

Fast forward 45 years to 2018 and HMRC’s policy in this respect was challenged via an appeal to the UK courts by News Corp UK and Ireland Ltd (News Corp).

Whereas the First-tier Tribunal decided in favour of HMRC, the Upper Tribunal upheld News Corp’s appeal (UT/2018/0065) and held that:

  • Group 3, Schedule 8, VATA 1994, is not limited to goods and can include services (such as digital publications);
  • the News Corp digital newspapers were essentially the same or at least very similar to the corresponding printed newspapers, fulfilling the same legislative purpose, and falling within the same category of items (or ‘genus of facts’) that UK legislation has always zero-rated;
  • the domestic legal principle known as the ‘always speaking’ doctrine is engaged (essentially, that legislation in certain circumstances should reflect and keep up to date with technological advances); and
  • the supply of the digital newspapers in dispute fell to be zero-rated within Item 2 of Schedule 8 (notwithstanding that they did not exist when the zero-rates were introduced).

On 19 February 2020, following the Upper Tribunal’s decision in News Corp, HMRC announced that there were no changes in its policy, which continued to be that supplies of digital publications are standard-rated and that it had been granted permission to appeal the Upper Tribunal decision to the Court of Appeal.

On 11 March 2020, in an about-turn, the Government announced in its Budget that it intended to legislate to apply a permanent zero-rate of VAT to supplies of certain ‘e-publications’ with effect from 01 December 2020. HMRC stated that the EU vires for this change is contained in Council Directive (EU) 2018/1713 which gives EU Member States (including the UK during the Transition Period) that already had a zero-rate in place on 01 January 2017 for printed matter the option of extending that VAT zero-rate to the electronic equivalent of the physical products.

On 30 April 2020, HMRC announced that they would bring forward the start date and apply a permanent zero-rate of VAT to supplies of certain e-publications with effect from 01 May 2020.

One can only guess at the reason why HMRC and the Government had a complete change of heart on this issue between 19 February and 11 March 2020. However, they are still adamant that this zero-rating cannot be applied retrospectively, i.e. before 01 May 2020, and so the News Corp case is likely to rumble on its course through the UK courts; unless separately settled.

If you have a client supplying e-publications into the UK, there is still an obligation for it to register for UK VAT, as zero-rated supplies are still taxable supplies. However, for such supplies from 01 May 2020 ostensibly no UK VAT now needs to be accounted for but VAT on attaching UK costs may be recoverable.

If your client was registered for UK VAT prior to 01 May 2020, there is possibly an opportunity to make a retrospective claim for a refund of VAT overpaid on News Corp grounds. Any such claim is likely to be rejected by HMRC, but in such circumstances we would normally appeal such a decision and have the appeal stood-over behind News Corp.

Note of caution: There are many quirks in VAT treatment in this area of VAT. By way of example, advertising, audio books and intellectual property remain standard-rated and, further, electronically-supplied plans or drawings for industrial, architectural, engineering, commercial or similar purposes are specifically excluded from zero-rating. Before applying the zero-rate, or if considering making a retrospective claim for a refund of UK VAT overpaid, you should seek VAT advice.

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Steve McCrindle

GGI member firm
Haines Watts
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
More than 60 offices throughout the UK
T: +44 207 025 4656
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With over 60 offices around the UK, Haines Watts is a UK Top 15 firm of chartered accountants specialising in the owner-managed business sector. Assisting over 35,000 business owners around the UK, Haines Watts supports business owners’ aspirations and helps them to achieve their goals.

Steve McCrindle is a VAT partner at Haines Watts, a leading provider of business advice and accounting services to owner managers operating in the UK and abroad. He is also Global Chairperson of the GGI Indirect Taxes Practice Group.

Published: Indirect Taxes Newsletter, No. 11 Autumn 2020 l Photo: Iakov Kalinin -


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