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News Corp Upper Tier decision

21st Jan 2020
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There is already lots of material on this important Upper Tier decision. The News Corp group includes The Times, The Times on Sunday, The Sun, and The Sun on Sunday. Doubtless many other appeals are dependent on the outcome of this appeal.

The FTT decision (in March 2018) was written with the expectation that the decision would be appealed. FTT Judges are aware of such possibilities and generally ensure that such decisions are carefully worded.

The summary of the FTT was that zero-rating under Group 3 is restricted to supplies of goods. Since digital publications (ie: for laptops, tablets, mobile phones, etc.) are supplies of service, zero-rating cannot apply. See paras 30-32 of the Upper Tier decision.

The Upper Tier re-visited the “always speaking” principle. This is important since in 1972, when VAT law was first introduced (Finance Act 1972), there was no contemplation that newspapers would be provided otherwise than on paper. The Upper Tier quoted from Bennison on Statutory Interpretation;

It is presumed that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law.

There was little case law on this matter for the Upper Tier to address.

The “always speaking” principle led the Upper Tier to disagree with the FTT on the issue of goods and services. Group 3, it said, cannot be limited to supplies of goods even though in 1972 eligible supplies were restricted to supplies of goods (para 59).

HMRC then proposed an argument that the digital publications were effectively “rolling news,” which must be excluded from Group 3. The FTT had established how frequently and to what extent the editions were updated. The conclusion was that the digital publications are more akin to a number of daily editions that to rolling news. HMRC failed on this point.

A further matter was to consider the dominant purpose or character of a newspaper. This is agreed to “to promote literacy, the dissemination of knowledge and democratic accountability by having informed public debate” (para 85). This is a strong argument for News Corp, since these same purposes are fulfilled by the digital versions.

The Upper Tier turned to European Law, HMRC raising the point that several articles of the EU PVD are relevant. The difficulty here is that only art 110 is relevant, since zero-rating is a derogation for the awkward Brits! Other portions of the PVD do not address the concession of zero-rating.

HMRC then argued that some recent EU proposals which suggest that the VAT treatment of digital publications should aligned with that of the equivalent hard copy version. This, they said, meant that, before the date of the proposals, different VAT treatment is implied (para 102). The Upper Tier was unimpressed. In my view, these proposals actually support the taxpayer’s argument, that digital and hard copy versions, if essentially identical in content, should enjoy the same VAT treatment.

Comment

There will be some debate as to whether “always speaking” can be applied outside of Group 3. My view is that it can. Some examples;

  • The range of sports available today is much broader than was available in previous years. Exemption applies (Sch 9, Group 10) to all such activities defined as sports.
  • Similarly, the range of education subjects is much broader today than in 1972. So the exemption in Sch 9, Group 6 still applies to those more recent created subjects.
  • Goods “ordinarily incorporated” into a new dwelling has also developed over time (Sch 8, Group 5).

(I have a few other ideas but am keeping my powder dry!)

It seems to me that the “always speaking” principle is the proper way to read VAT legislation. A word or phrase used in the legislation must be capable of development over time.

The Upper Tier decision is here: http://www.bailii.org/uk/cases/UKUT/TCC/2019/404.html

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