The Chancellor's Fast-Tracking of Zero VAT Rating on Ebooks and Digital Editions should bring Welcome Relief to Many Publishers

A lot has happened since we posted our piece on the Upper Tax Tribunal and its judgment on VAT exclusions for digital editions - in particular news-related offerings. In fact Chancellor Rishi Sunak has brought forward the new legislation and HMRC changes a lot earlier - considering the hit publishers have been taking during this pandemic.

Effective Today 1st of May - Publishers no longer need to pay 20% VAT on the sale of any Digital Edition. As defined largely by the recent Tribunal - this means really that publishers only qualify for the 20% exemption if their Digital Editions are near enough the exact copy of the equivalent Printed Editions. So all Ebooks in general are covered as well as Digital versions of the more traditional Printed Editions of magazines, newspapers etc.

If advertising makes up more than 50% of the edition - then it is no longer exempted. Also Audiobooks are specifically excluded from this provision - much to the disappointment of the Royal National Institute of Blind People.

Also excluded from this provision is any kind of News Feed Service - so any service posting regular news updates which are forwarded by subscription - would not qualify for the 20% VAT exemption.

The News Edition definition in the past has required there to be a physical print counterpart - while there has never been such a qualifier for Ebooks. It’s slightly unclear as to how ’digests’ would be covered by this new exemption - i.e. the creation of say daily Digital Editions of news roundups which had no print equivalent.

As always - the law isn’t 100% clear on every scenario here. The three Items specifically excluded from this arrangement are Advertising, Audiobooks and Intellectual Property. The last category is defined as professional digitisation of industrial, architectural and engineering plans and drawings - which will all still carry the 20% VAT.

Amazon has already adjusted its pricing for Kindle Ebooks - so it’s great news for the reading public in general that Digital Books have finally come into line with the traditionally printed editions. I also feel that Human Rights advocates will eventually overturn the exclusion of Audiobooks - as it’s obviously discrimination against the hard of hearing - and largely goes against the charter on Accessibility! Some will argue that screen-readers are available for digital content - but it’s still odd so exclude just another format of the same content.

So book publishers and the reading public should benefit enormously from this, while there is some relief here for News Publishers. The law unfortunately lags a little behind technology as always in its highly specific definition of what might construe a Digital Edition. That in most cases there needs to have been some traditional print-based precursor to Digital News Editions all seems a little archaic really.

There is no provision here really for those more dynamic subscription services unless they can somehow package their ’News Feed’ services into some format of Digital Edition - but then it’s not entirely clear as to what would be permissible within that context.

You can read the full UK Government Legislation on Gov.uk - and it specifically covers areas such as pricing definitions and VAT on Ebook Readers and Software. So it’s only the Content / Media that is specifically exempted - and it’s still a pretty narrow band - although there is some room for interpretation on what properly constitutes a Digital Edition. The most obvious format of Digital Editions are PDFs and similar digital portable document formats - which are specifically almost just ’scanned’ versions of the equivalent printed versions. There are further questions here on degrees of interactivity - while it seems the stipulation really solely covers very static / page-based equivalents - anything else would fall foul of the same treatment as Audiobooks for now - which are rather defined as ’entertainment’ than essential media.

I personally expect to see further exemptions before long - and the inclusion of Audiobooks into this scheme, since in failing to do so, the government is discriminating against a minority group.