VAT on electronically-supplied Publications

From 1 May 2020, electronically-supplied publications are to be zero-rated. Previously, only tangible, printed publications could qualify for zero-rating. This changed was planned to take effect from 1 December 2020, but is has been brought forward due to the coronavirus pandemic.

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.

‘Electronically-supplied’ is not defined in law, and its meaning is taken to be ‘supplied online or by email’. In order to identify whether an electronically supplied product qualifies for zero-rating, it will be necessary to establish that the tangible equivalent of the product falls within items 1 to 3 of Group 3, Schedule 8, VAT Act 1994, which are as follows:

Item 1 - Books, booklets, brochures, pamphlets and leaflets.

Item 2 - Newspapers, journals and periodicals.

Item 3 - Children’s picture books and painting books.

The measure excludes from the zero-rating any electronically supplied item that is wholly or predominantly devoted to advertising or is wholly or predominantly consisting of video or audio content.

As the change has been brought forward, we have not had the luxury of being able to read consultation documents, but we can refer to HMRC’s guide to VAT on Books to help us determine whether a tangible item qualifies for zero-rating. This guide was useful to us at Mercia, as we sell printable products in electronic form.

The following information from the guide may be useful when determining the VAT liability of publications, whether they are supplied tangibly or electronically.

What are books and booklets?

• They have several pages;
• They have a cover that is stiffer than the pages;
• They are either bound or adapted for inclusion in a ring-binder;
• They are intended to be read or looked at, as opposed to being completed or detached.

What are brochures and pamphlets?

• They consist of either several pages that may be fastened together, or a single folded sheet;
• They are designed to be held in the hand and read;
• They are not intended for completion or detachment of pages;
• They convey information by means of text;
• They may be, or contain, an advertisement, but not necessarily;
• Their purpose goes beyond mere utility, but are not solely for entertainment.

What are leaflets?

• They are limp, i.e. they are made of paper - not paper stock in excess of 230gsm, laminated paper or card;
• They are designed to be held in the hand and read;
• Their main function is to convey information.

What are newspapers, journals and periodicals?

• They are designed to be read and to convey information;
• They consist of several sheets, which are either folded or bound together, and
• They are published at regular intervals determined by the publisher, not by some external event.can

As with many areas of VAT, seemingly simple questions such as “What is a leaflet?” have been analysed and discussed during many tribunals. It seems that both the physical structure and purpose of an item are considered, but an overriding feature of a zero-rated publication is that it is intended to be “held in the hand and read”.  Electronically-supplied publications, due to their very nature, cannot be held in the hand, so further guidance in this area will be extremely useful if it is ever published by HMRC!