On Monday 6th January, a tax tribunal ruled that the digital edition of the Times meets the legal definition of a newspaper and, as such, it’s subject to zero-rated VAT.
What does that mean?
Rupert Murdoch’s newspaper group News UK had long argued that subscriptions to online editions of the Times and The Sunday Times should not be subject to 20% VAT rate.
A law segment dating back to 1972, in fact, establishes that some printed products such as newspapers, books and maps are subject to zero-rated VAT as their consumption is considered a benefit to the public.
Obviously, when the law was written there was no reason to consider definitions of newspaper going beyond their print version. News UK fought a long-running legal battle to change that and, as of last Monday, the tax tribunal finally ruled in their favour.
The basis for the decision is that, since the online editions of The Times and The Sunday Times are only updated four times a day, they satisfy the characteristic deemed “essential” by the tribunal that a “newspaper is produced in periodic editions”.
Why is it important?
For News UK, this could mean huge future savings, as well as tens of millions of pounds of potential claims for VAT overpayment, dating back to September 2010 when the online edition was launched.
But it doesn’t stop there. The ruling could set an important precedent for other companies within the media sectors and beyond, that have been transitioning to selling their products in digital form.
Our VAT specialist Martin Kaney suggests that it might be good for companies whose product fits the same definition to submit a protective claim. HMRC is very likely to oppose the tax tribunal’s ruling, and to take the case to the court of appeal, and future rulings could overturn the decision or potentially limit claims to only 4 years.
But if the decision is upheld submitting a protective claim now could help eligible companies not to have their claim limited in the future.
We can help you with that. If you think your business would be eligible for a VAT claim for a digital product that benefits from zero-rated VAT in its physical form, just give us a call at the number below.
We’ll update this blog with any future developments on the matter. Subscribe to our newsletter to get our content directly to your inbox.