Independent VAT Consultant
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Hot news: VAT-free digital editions

The upper tribunal has ruled that digital newspapers should be zero-rated for VAT. This ruling will have huge implications for all online newspapers and news websites, but HMRC is likely to appeal.

13th Jan 2020
Independent VAT Consultant
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Newspapers and laptop

News Corp UK and Ireland Ltd [2019] UKUT0404 had an early Christmas present when the upper tribunal (UT) released its verdict that digital newspapers qualified for zero-rating in the same way as a printed copy.

The decision is controversial, to say the least, as it overturns the verdict reached by the first tier tribunal (FTT) in March 2018 that digital newspapers should be standard rated.

What is a newspaper?

The legislation is very simple: VATA 1994, Sch 8, Group 3, Item 2 confirms that zero-rating applies to “newspapers, journals and periodicals.” But what exactly is a newspaper? HMRC’s view, supported by the FTT, is that a ‘newspaper’ must be a printed copy, ie a supply of goods. The FTT decided that a ‘digital newspaper’ is a supply of services and therefore is precluded from zero-rating.

However, the UT looked at the issue very differently, seeing the “dominant purpose or character” of a newspaper as being more relevant than the format in which it was received by the reader. It looked behind the words of item 2 of Group 3 to examine the purpose of zero-rating for newspapers, journals and periodicals, which was to “promote literacy” and allow the “dissemination of knowledge and democratic accountability by having informed public debate.”

Always speaking

The doctrine of “always speaking” means that legislation should take account of “relevant changes which have occurred since the enactment was originally framed”.

When the zero-rating schedule was drafted in 1972, there was no such thing as a digital newspaper but such products now carry out the same or very similar functions as a printed version.

The FTT rejected the always speaking argument of the taxpayer but the UT saw things differently and accepted that it was relevant to this situation.

The decision

The UT concluded that only UK law was relevant because our VAT zero-rated categories were drafted before the UK joined the EU, and they have not been extended since then. Based on the fact that the UT concluded that the zero-rating of newspapers did not preclude digital versions, and the legislation was subject to the doctrine of always speaking, it allowed the appeal:

“Once it is appreciated that its characterisation as a service, not a good, is not a reason in itself to disqualify it from falling within the definition in item 2, it is difficult to discern any legislative purpose for excluding it.”


It is important not to get carried away with this decision. HMRC will consider the tribunal’s findings and may seek to appeal the decision to a higher court.

When VAT was introduced to the UK in 1973, the trading world was very different. The tax works perfectly with the added value concept of goods being supplied from a manufacturer through to a final consumer, but it sometimes struggles with the online world of global trading.

If the judges in two separate courts interpret so differently the question of what rate of VAT applies to a household item such as a newspaper, what hope is there for us on the shop floor?

I look forward to part three of this exciting VAT drama!    

Replies (1)

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By pauljohnston
13th Jan 2020 10:01

Now would be a good time for the Treasury to acknowledge that times have changed (its employees now have mobile phones for instance) and accept the ruling and include a statutory definition in the March budget.

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