Save content
Have you found this content useful? Use the button above to save it to your profile.
istock_NoDerog

VAT grey area on colouring books

by
24th May 2016
Save content
Have you found this content useful? Use the button above to save it to your profile.

HMRC is mindful of collecting more VAT on activity books for adults.

The Bookseller magazine is reporting that publishers have been advised by HMRC to add 20% VAT to the price of colouring books which are designed for the adult market. Until now many publishers had treated such books as zero-rated, based on HMRC’s guidance in VAT Notice 701/10: Zero rating of books and other forms of printed matter.

That guidance (para 3.8 of Notice 701/10) includes an example of zero-rated books: “children’s painting and drawing books with sample pictures for copying, or outlines of pictures for colouring, painting or drawing”.

There is no mention in the VAT guidance of colouring books designed for an adult market, as those products were a tiny proportion of the market when the guidance was written. However, now the market for adult colouring books is worth over £20m per year, with over 3m copies of such books sold in 2015 alone.

The law on zero rating for books is contained in VAT 1992, Sch 8, group 3. Printed books and children’s colouring books are currently zero-rated, but it is understood that HMRC are challenging the idea that adult colouring books and also dot-to-dot titles, where some pages can be pulled out, can be classed as a “book”. HMRC appear to think that adult colouring books ought to be classed as 'uncompleted' books, which currently attract 20% VAT.

The problem for publishers and book retailers is where to draw the line between books designed for children, and those designed to be used by adults. This could turn out to be another of ‘biscuit or cake’ argument as played out over McVittes Jaffa Cakes back in 1991.

VAT consultant Linda Skilbeck believes most of the crazy results for such VAT cases are due to the UK’s list of zero-rated items. That list was negotiated back in 1973, when the UK adopted VAT on joining the Common Market (as it was then), and has remained frozen since that date. Meanwhile, technology and fashions in publishing have moved on leaving the zero-rated list high and dry in the world of 1973. This is why electronically delivered newspapers (e.g FT subscription) bear VAT at 20%, but the paper version of the same newspaper is zero-rated.

Thinking outside the lines, some publishers have started to include a limited amount of   text alongside the art work in the sophisticated colouring books. This may allow the whole product be treated as say a guide to mindfulness (zero-rated for all customers) rather than as a standard-rated adult colouring book.

That solution may work for books yet to be published. But as HMRC can assess underpaid VAT for up to four years, the publishers and HMRC may yet be fighting over the crayons for some time to come.    

Tags:

Replies (3)

Please login or register to join the discussion.

avatar
By Dutchnick
25th May 2016 11:51

The whole of VAT is a mess with exemptions and confusions, tampon tax, hot food/cold food, disabled this and that and even my daughter pays no VAT on her clothes as she gets away with kids sizes. Slap it on everything and even a reduced rate on food (6% here in the Netherlands). Top up pensions and benefits to cover all increases implied.
Good tax, actually runs well...in my experience and is effective. If I buy a Ferrari I pay a lot if I buy a Lada I do not!(are Ladas still available?)

Thanks (0)
avatar
By raybackler
25th May 2016 13:05

This is a rubbish tax that is charged to many businesses who shouldn't be involved because it is tax neutral. They just have to comply with the unnecessary bureaucracy. It is a consumer tax and it is inconsistently applied. Pasty tax and Jaffa cakes are just two examples of the many, many idiocies.

Anyone who owns property is faced with a myriad of rules to do with zero rating, exemption, lower rate, standard rating, partial exemption etc. Whilst touching on this, partial exemption is a minefield. I can't believe any sane person would invent this unnecessary complexity, but they have.

My subscription service manual for VAT is the same size as the manual for all of the other taxes combined and that says it all.

Thanks (0)
By dialm4accounts
26th May 2016 14:01

I wholeheartedly agree - there will be a lot of time spent fruitlessly ironing out the anomalies (for example, a Harry Potter colouring book that both adults and children might enjoy). Also, I do not really understand why an adult colouring book should be treated any differently from a children's colouring book for tax purposes - after all, an intelligent and artistic child might use an adult's book...

Thanks (1)