The Upper Tribunal released its ruling in December 2019 in the case of News Corp UK & Ireland Limited concluding that digital versions of newspapers should be zero-rated for VAT purposes.
News Corp is the publisher of newspapers including The Sun and The Times. Whilst it has been accepted that hard copies of newspapers qualify for zero rating, HM Revenue & Customs’ (HMRC’s) interpretation of the legislation was that relief did not extend to electronic versions of the same publications.
However, News Corp submitted a claim to HMRC on the basis that supplies of electronic newspapers served the same purpose as those in hard copy and therefore should benefit from zero rating. HMRC rejected this claim, leading News Corp to appeal to the First Tier Tribunal (FTT).
The main argument extended by News Corp was that the purpose behind the zero-rating of written publications was to improve literacy, the dissemination of information and democratic accountability. It went on to argue that once legislation had been enacted it was necessary for it to be kept up-to-date to reflect technological advances. Although the FTT accepted that digital versions of newspapers served the same purpose as the hard-copy equivalent, it rejected the News Corp appeal on the basis the legislation only allowed for the zero-rating of goods, not services such as electronically supplied newspapers.
News Corp appealed to the Upper Tribunal, which concluded that the FTT had reached the wrong decision in determining the legislation limited zero-rating to goods only. In addition, it accepted the News Corp argument that electronic versions of newspapers shared the same purpose and characteristics as a hardcopy newspaper.
“The outcome of this case will have significant implications not only for those organisations which currently supply electronic publication but also those considering a move towards e-publishing.
“We had already seen movement in this area with the Council of the European Union agreeing in 2018 to a proposal allowing member states of the European Union to align the VAT treatment of electronic and physical publications. It was expected that the UK would agree to a reduced rate for electronic publications, but the decision reached in this case will put pressure on HMRC to go further.
“Whilst It is anticipated HMRC will now take this case to the Court of Appeal, this is a significant victory for suppliers of electronic publications who have long campaigned for parity of treatment.”