News Corp e-newspapers were standard rated for VAT

In HMRC v News Corp UK & Ireland Limited [2021] EWCA Civ 91, the Court of Appeal reversed the decision made by the Upper Tribunal (UT), finding that electronic versions of newspapers should be standard rated for VAT.

• News Corp is the publisher of both printed and electronic newspapers, including The Sun and The Times.
• It contended that supplies of its digital newspaper editions made between 2010 and 2016 should be given the same treatment as printed newspapers and therefore zero-rated for VAT.
• HMRC argued that the legislation only allowed for the zero-rating of goods (i.e. printed newspapers) and therefore excluded services such as digital newspapers.
• News Corp appealed to the First Tier Tribunal (FTT) which concluded that, although the digital versions were “essentially similar in content to and shared the same characteristics as the newsprint editions”, they were not newspapers within the legislation. As a result, they could not be zero-rated.
• The UT subsequently Overturned the decision of the FTT finding that electronic versions of newspapers shared the same purpose and characteristics as printed newspapers and therefore digital versions of newspapers should be zero-rated.
• HMRC appealed.

The Court of Appeal found in HMRC’s favour, concluding that electronic versions of newspapers should be standard rated. It was held that:  

• Although online versions of newspapers did not exist when the relevant legislation was written, they should not be excluded from zero-rating if they fall within the scope of Parliament’s original intention when the legislation was drafted.
• The zero-rating provisions must be given a strict interpretation. Care must be taken that the exceptions from standard rating are not extended as they are subject to Article 110 of the Principal VAT Directive which acts as a ‘standstill’ provision.
• The language used by Parliament implies a clear legislative intent to only include tangible or physical items in Group 3 of Schedule 8 VATA 1994 and exclude (particularly from Item 2: ‘Newspapers, journals and periodicals’) supplies that were not tangible, such as digital newspapers.

Comment

This decision affects supplies made by News Corp in the VAT periods September 2010 to June 2014 and 28 January 2013 to 4 December 2016.

As Announced in Budget 2020, a zero-rate of VAT applies to e-publications from 1 May 2020 to ensure that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts. 

Useful guides on this topic

VAT: E-newspapers should be zero-rated
In News Corp UK & Ireland Limited v HMRC [2019] UKUT 0404 (TCC), the Upper Tribunal (UT) found that electronic editions of newspapers should be treated in the same way as printed newspapers for VAT, and zero-rated.

Books and Printed Matter
At Budget 2020 it was announced that from 1 December 2020 e-publications will be zero-rated. This measure was fast-tracked forward to a new commencement date of 1 May 2020 due to the Coronavirus lockdown.

Goods or services for VAT?
What are goods and what are services for VAT? The answer may have an impact on the time of supply, the place of supply and in some cases the rate of the supply. The answer is not always as straightforward as it may seem.

Appeals: VAT
The process of making a VAT appeal largely follows that of direct taxes, however, there are some differences.

Correcting VAT errors
What are the time limits? Can you do it through the VAT return? Do you have to notify HMRC?

External link

HMRC v News Corp UK & Ireland Limited [2021] EWCA Civ 91