The company produces a weekly newsletter containing the Pop music charts:
Charts Plus which is printed and distributed to subcribers with zero rate VAT attached to the subscription fee. However the company now has permission to distribute the information in the newsletter electronically to subscribers. Its is proposed htat this is achieved by sending a PDF version ofhte printed newsletter as an attachment to an email. Will standard rate VAT apply to the scription fees of subscribers who opt for this method of delivery rather than the paper verison?
Rebecca Cave
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VAT on pdf
Just ask yourself what the common understanding of a newsletter is. Your client has not supplied any paper on which it is to be eventually printed - so it cannot be a newsletter. It is an electronic image of a document for which I know of no zero rating or exemption. If you cannot find either it must default to standard rate.
Electronic publishing not zero-rated :-(
You may find the comments in Fisher Educational Limited's appeal to the VAT Tribunal, which was published recently. Decision number 17902.
Remember your basic rules
As so often in VAT a query, which seems difficult at first, answers itself by reference to the basic rules. The VAT rate applicable to a supply must be known at the taxpoint - so the rate applicable when the cash was paid is your answer!
Future supplies to non UK customers seem likely to qualify as outside the scope of VAT under the place of supply rules, being the provision of information (para 3, schedule 5 VATA 1994). Remember the business requirement within the EU. If you need a detailed explanation, see my book in the Tolleys Tax Essential series.
Picking up on earlier replies, the supposition that there is an anomaly, which should be rectified, betrays ignorance of the European VAT framework! UK zero rating cannot be extended -- so the answer is to scrap that for written material!
As for whether faxing the material would qualify for zero rating, look at the law in group 3 schedule 8. Would the supply in individual sheets qualify as a newspaper, journal or periodical or, perhaps, as a pamphlet or leaflet? Customs might well argue. I think it probably would -- though, of course, that form of delivery is unlikely nowadays.
Yes - the zero rating only applies to physical items.
You also need to be careful that you do not contaminate the zero rating of the printed copy subscription, by making the emailed version a option for those subscribers for 'free'. If subscribers can obtain both for a single fee it may need to be apportioned into a zero and a standard rated element.
What about fax?
What is the situation if the newsletter is faxed to clients? Zero or Standard?
Many thanks
The apportionment problem
Many thanks for the answers so far, they have been very helpful.
The company plans to offer subscribers the choice of changing to an electronic delivery of the newsletter at no extra cost, from next week. However subscribers have paid the subscription fee in advance for a quarter or a year. How should the VAT accounting work when the product (according to C&E) changes part way through the pre-paid period?
Also does the VAT treatment change if the subscriber is resident in the USA, Europe or Australia?