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Summary
The appellant was the representative member of a VAT group and appealed against decisions of HMRC that digital versions of The Times, The Sunday Times, The Sun, and The Sun on Sunday could not be zero-rated under Item 2 Group 3 of Schedule 8 Value Added Tax Act 1994 and were, therefore, standard rated for VAT purposes.
Secondly, even if the digital editions of the above titles are not ‘newspapers’, the appellant contended that the principle of fiscal neutrality nevertheless requires zero-rating on the basis that, viewed from the perspective of the customer, they satisfy the same customer needs as conventional printed editions. HMRC argued the digital editions were not similar to the newsprint editions and, in any event, the principle of fiscal neutrality could not be used to expand the borders of zero rating from their 1991 limits.
Background
The appellant argued that there was essentially no difference in the journalistic content or news teams for the newsprint and digital editions. The content for both the print and the digital editions was in each case produced by one set of reporters, one set of section editors, one set of picture researchers and designers, and one set of sub-editors, overseen by a single editor. When commissioning and publishing the articles to constitute the core edition, The Times and The Sunday Times do not distinguish between a ‘print story’ and a ‘digital story’. The written copy is produced by the individual desks, reporting to section editors who in turn report to the editor.
The appellant submitted that Item 2 Group 3 of Schedule 8 of VATA 1994 should be interpreted purposively. The purpose of the provision was to promote literacy, the dissemination of information and democratic accountability. There was, however, a further principle of statutory interpretation, which formed an important part of the appellants’ case. This principle was that legislation once enacted had to be kept up-to-date with, inter alia, technological advances so that, in other words, a statutory provision is ‘always speaking’. This was important in the present case because digital editions of newspapers did not exist in 1973.
The appellant submitted that it was necessary to identify the purpose of the relevant provision and then consider whether that new item, new technology, or new state of affairs shared the same inherent characteristics as those supplies which were admitted being covered by the wording. HMRC submitted that all the items in Group 3 of Schedule 8 VATA 1994 consisted of goods, not services. In other words, Item 2 applied only to newsprint newspapers.
The supply of the digital editions of the titles constituted a supply of services. Group 3 of Schedule 8 did not apply to the supply of services. Treating these digital editions as zero rated ‘newspapers’ was contrary to the applicable UK legislation and would be an impermissible extension of zero rating contrary to the derogation requirements of Article 110 PVD. The newsprint and digital editions were not comparable and, even if they were, the principle of fiscal neutrality was not breached.
Decision
It was common ground that the digital editions of the titles when supplied to readers constituted a supply of services. The First-tier Tribunal (FTT) considered that this point was fatal to the appellants’ argument because Item 2 Group 3 Schedule 8 VATA 1994 deals only with supplies of goods i.e. ‘newspapers, journals and periodicals’ in physical form and, therefore, the appeal had to be dismissed.
Comment
There has been considerable discussions in the ECJ and the European Commission regarding the VAT liability of digital books and publications over the past few years, but the UK courts have now produced a robust decision rejecting the argument for zero-rating.
News Corp UK & Ireland Limited v Revenue and Customs [2018] UKFTT 129 (TC)
