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VAT on online services

Later this year we intend to print, promote and sell an annual handbook for the construction industry of construction costs in the UK. A printed, semi hard backed book posted out to subscribers each year. It is a compilation of current costs and as these change regularly we provide free of charge access to a website which is updated each three months to provide current cost information. This online service is not available on its own and is rather like Glass's guide for the motor trade is just a compilation of costs.

Our problem is what is subject to VAT? The book is zero rated but it is difficult to find out how the online portion is treated, and to get it wrong is a nightmare we would rather not visit - retrospectively.

There is a similar product in a slightly different sector which works the same way, an annual hand book which includes an update service on line. This book and online service is zero rated and is a mirror of what we will do. Previously this other publication was provided with a CD being sent out each six months which contained the updates. It would appear that as this was a physical item it was subject to VAT which was charged.

As we will be supplying mainly VAT registered business the charging is not a problem in its own right but we anticipate doing similar things into other EU countries. All subscriptions and mailings will emanate from the UK and if subject to VAT we would be required to take the VAT national number from each application, checking against the EU or HMRC database to establish validity of each application (if it is a duff number we would become responsible) and he idea of using a Bulgarian debt collection agency does not fill us with glee! As the online service is, in our eyes free and is only available with handbook subscriptions it appears to us to be clear that it all should be zero rated. HMRC were not over helpful and I suppose they do not get too many calls from people wanting to pay more - Starbuck excluded. Has anyone any comments or good ideas. Help will be much appreciated.


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29th Jan 2013 16:17

Write to HMRC

Hi there

I think it has to be worth an argument that the whole supply is zero-rated.  If there is any VAT due on the online service it should be tiny. I believe the various technical manuals which include online access are almost exclusively zero-rated.  Printed matter is also very expensive to produce and distribute, whereas I imagine the costs of the online service are not huge, so this has to have an impact too on what is being supplied.

In Card Protection Plan, it was held that an ancillary element does not constitute, for the customer, an aim in itself, but is a means of better enjoying the principal service (or good) supplied.

As the HMRC VAT notie on printed matter says,

General indicators of a single supply, (although they are not conclusive), are:

Single price.Advertised as a package.Components not available separately.Goods physically packaged together.Customer perceives that what they are getting is a single supply not a package (for example, a tailor made suit not cloth and tailoring services).

I would say that the fact the online access is not an aim in itself and is not available separately is important.

To make sure that there will be no arguments later, it might be an idea to write to HMRC to explain what you are doing and to let them know that no output VAT will be declared, and ask them to contact you if they disagree.

Hope this helps.

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29th Jan 2013 19:31

If your question relates to supplying EU customers then it matters not whether it is a supply of goods or services if the customers are VAT registered. If it is a book then subject to Acquisition tax in the country of acquisition and you will still need their VAT number and complete an EC Sales list but probably not an Intrastat declaration as it will be below the registration limit.

If it is a supply of services, then subject to Reverse charge in country of customer's establishment. You will still need their VAT number and to complete an EC Sales List.

On the basis of the above you could really plump to argue goods or services - doesn't make a lot of difference still the same process.

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