UK VAT is no longer payable on electronic publications after the government announced on Thursday that it was bringing forward a change not due to take effect until December to 1 May.
VAT was previously charged at 20% on digital publications, even though physical versions of the same book or newspaper were not subject to VAT.
The change means that with effect from 1 May 2020, electronic supplies of books, newspapers and magazines will be zero-rated for VAT purposes. Brochures, booklets, pamphlets, leaflets and children’s picture and painting books will also be covered by the changes.
However, products that are wholly or predominantly devoted to advertising, audio or video content will continue to attract VAT. This means that audiobooks remain subject to VAT at 20%.
In March's UK budget Rishi Sunak, the chancellor, announced the change in VAT treatment but said that it would take effect from 1 December. However, yesterday the government said that the change was being brought forward to reduce the cost of e-publications "during these challenging times when many people are confined to their homes and schools are closed".
"The change is welcome for consumers and also for the newspaper industry, which has been hit hard by declines in sales as a result of the coronavirus pandemic," said Catherine Robins, a tax expert at Pinsent Masons, the law firm behind Out-Law. "However, sellers of electronic publications have had very little time to implement the necessary changes to their websites and their systems."
The UK is subject to the EU rules in relation to VAT until the end of the Brexit transition period, which is set to expire at the end of this year. EU VAT law used to prohibit the application of reduced rates of VAT to electronically supplied services. However in November 2018 the EU began to allow member states to apply the same VAT rate to e-publications as for their printed equivalents.
Late last year the UK's upper tax tribunal decided that digital versions of The Times, The Sunday Times, The Sun and The Sun on Sunday published over two periods spanning between September 2010 and 4 December 2016 benefited from zero-rating for VAT purposes. However, notwithstanding this decision, HMRC continued to maintain that it would continue to treat supplies of digital publications as standard rated.
