PPA Blog

Guest Blog: Digital VAT zero-rating and scope for retrospective claims

By now you will have seen the news regarding the bringing forward of the introduction of the zero rate for digital publications to 1 May 2020. As such, you will no longer have to account for VAT on supplies of a myriad of digital publications that you make to your customers.

The following publications, when supplied electronically, are now zero-rated for VAT purposes

– Books, booklets, brochures, pamphlets and leaflets.

– Newspapers, journals and periodicals.

– Children’s picture books and painting books.

It should be noted that any digital publications that contain significant amounts of multimedia (video, audio clips etc.) are excluded from the zero rate and will continue to attract VAT at 20%, including audio books (except for the small minority of supplies that were already zero-rated under different legislative provisions). Furthermore, when supplied electronically, publications that are predominantly dedicated to advertising are also excluded from the zero rate and will continue to attract VAT of 20%.

Lastly, any devices or software required to access the digital publications are also excluded from the zero rate. As such, you should continue to account for VAT at 20% on supplies of e-readers.

Historic supplies

Unfortunately, the announcement doesn’t mean that you will be able to automatically reclaim the VAT you’ve historically accounted for on digital publications. Following the News Corp judgment in December, HMRC have released two briefs regarding VAT on digital publications. In Revenue & Customs Briefs 1/2020 and 3/2020, HMRC have been clear that they will refuse any claims to recover any retrospective VAT. RCB 1/2020 goes on to state that any rejection then needs to be appealed to the First-tier Tribunal if the taxpayer wishes to pursue the claim, pending the outcome of the News Corp litigation.

That said, following the News Corp judgment released in December, there is still the potential to recover the VAT you have accounted for over the last four years. Following on from our presentation to many of you in February, we would still advise that if you supply digital publications, you should review the nature of these, and provided they’re in line with the News Corp decision, consider filing a claim. If the facts of your claim are comparable to that of News Corp, any appeal against HMRC’s rejection of the claim should be able to be stood behind the News Corp litigation, meaning that you will not have to litigate yourself. By doing this now, you would protect your position for VAT periods ending in the last four years. If you decide to await the outcome of the Court of Appeal hearing (which may not concluded until late 2021/2022), you would then be able to only go back four years from that date thereby reducing the value of any claim.

Whilst the News Corp judgment only covers digital newspapers, it sets important legal precedent that is applicable to other digital publications and may mean you can recover the VAT you’ve accounted for historically.

I appreciate VAT may not be at the forefront of your minds in the current environment. However, we would advise you to consider our comments in relation to your supplies in order to protect your historic financial position. 

For more information please contact

Abi Briggs – abbriggs@deloitte.co.uk

Glen Harling – gharling@deloitte.co.uk

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