HomeInsightsHMRC publishes Revenue and Customs Brief 3 (2021): VAT liability of digital publications – update on litigation in News Corp and Ireland Ltd

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The brief gives an update on the VAT treatment of supplies of digital newspapers and other digital publications before 1 May 2020. This follows the Court of Appeal decision in Revenue and Customs v News Corp UK & Ireland Ltd ((2021) EWCA Civ 91). It has no impact on the Government’s introduction of a new zero rate for supplies of certain e-publications (including e-newspapers), which came into effect from 1 May 2020. The brief also explains how organisations can submit claims for overpaid VAT based on the Upper Tribunal decision (UT/2018/0046) and protect their position until the litigation in this case has concluded, if they want to.

Before the introduction of a new zero rate for supplies of certain e-publications on 1 May 2020, HMRC’s policy, based on UK legislation, was that the zero rate only applied to the sale of printed matter (that is, supplies of goods). Therefore, before 1 May 2020, the sale of digital newspapers (which are services) has always been standard rated.

News Corp challenged HMRC’s policy and submitted claims for VAT, which it claimed had been overpaid on income it received for granting access to digital versions of several of its publications. HMRC rejected these claims on the basis that the VAT had been correctly accounted for at the standard rate. Following a recent decision at the Court of Appeal (overturning the Upper Tribunal’s decision), HMRCs position that the VAT had been correctly accounted for at the standard rate, has been upheld.

News Corp has sought permission to appeal the decision to the Supreme Court. Therefore, the brief states, organisations may want to protect their position by making claims for overpaid VAT based on the Upper Tribunal decision until such time as the litigation has concluded.

There have been no changes in HMRC’s policy which, in line with the Court of Appeal judgment, continues to be that supplies of digital publications before 1 May 2020 are standard rated. Accordingly, the brief states, any claims made in reliance of the Upper Tribunal’s decision in News Corp will be rejected. To read the brief in full, click here.