Revenue and Customs Brief 3 (2021) VAT liability of digital publications - update on litigation
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Published 11 March 2021
VAT liability of digital
publications – update on litigation in News Corp and Ireland Ltd
Purpose of this brief
This brief, which replaces Revenue and Customs Brief 1(2020), 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 News Corp UK and 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.
It 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
Who needs to read this
Organisations that make supplies of digital publications and their
Supplies of newspapers are zero rated under UK legislation (the
relevant provision is Item 2 of Group 3 of Schedule 8 to the Value
Added Tax Act 1994). This legislation has been in place since VAT was
introduced into the UK in 1973.
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
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, HMRCs position that the VAT had been correctly
accounted for at the standard rate, has been upheld.
Upper Tribunal decision
The Upper Tribunal had previously found that the supply of the
digital newspapers in dispute was zero rated for the following reasons:
- Group 3 of Schedule 8 is not limited to goods and can include
services (such as digital publications)
- the News Corp digital newspapers were essentially the same or at
least very similar to the corresponding printed newspapers, fulfilling
the same legislative purpose, and falling within the same category of
items (or ‘genus of facts’) that UK legislation has always
- the domestic legal principle known as the ‘always
speaking’ doctrine is engaged (essentially, that legislation in
certain circumstances should reflect and keep up to date with
- the supply of the digital newspapers in dispute fell to be zero
rated within Item 2 (notwithstanding that they did not exist when the
zero rates were introduced)
The Court of Appeal decision
In its judgment of 28 January 2021, the Court of Appeal overturned
the Upper Tribunal decision finding that:
- the clear legislative intent of the wording in Group 3 of
Schedule 8 is to include tangible items only (goods) and to exclude
non-tangible items (services)
- supplies of digital newspapers are not in the same genus of facts
as the tangible items expressly included in the wording of Item 2 of
- the Upper Tribunal impermissibly elevated the always speaking
doctrine above the requirement for a strict construction of the wording
in Item 2 of Group 3
- the Upper Tribunal, having concluded that printed and digital
newspapers were in the same genus of facts and fulfilled the same
social purpose irrespective of their form, in effect asked what
Parliament would have done faced with the invention of a digital
newspaper that was never in contemplation and supplied the answer
itself, which was impermissible
- the Court of Appeal held that the digital news services were
simply not within the zero-rating provisions and the scope of those
provisions cannot be extended by the application of a principle of
interpretation, such as fiscal neutrality
- to read the term newspapers in Item 2 of Group 3 as including
digital newspapers would amount to an impermissible expansion of the
zero rate provision in Item 2
While the Court of Appeal decision supports HMRC’s policy,
News Corp has sought permission to appeal the decision to the Supreme
Court. Therefore, 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.
HMRC policy in
relation to digital publications
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.
of claims made for supplies of digital publications
As HMRC’s policy has not changed, any claims made in reliance
of the Upper Tribunal decision in News Corp will be rejected.
Where an organisation considers that the Upper Tribunal decision in
News Corp applies to its own supplies of digital publications it should
provide HMRC with full details in writing, including:
- a full description of the supplies for which the claim is being
made and which item of Group 3 of Schedule 8 the supplies fall
- clear reasons why it is considered that the claim should be
treated in the same way as the supplies in the News Corp Upper Tribunal
- a breakdown of the amounts of overpaid VAT being claimed by
prescribed accounting period and the method by which they have been
A claimant must be able to give, on request, copies of documentation
used in the calculation of a claim. If insufficient information is
given in support of a claim it will be rejected and the organisation
will need to resubmit its claim with the requisite information.
As HMRC’s policy continues to be that supplies of digital
publications are standard rated HMRC will issue a decision to reject
the claim. In order to protect its right to claim overpaid VAT an
organisation will be at liberty to appeal HMRC’s decision.
All claims will be subject to the 4-year time limit in section 80(4)
of the Value Added Tax Act 1994. Once the litigation in News Corp has
concluded, appeals will be considered in line with normal procedures.
They may also be subject to consideration of unjust enrichment.
About the Author
© Crown Copyright 2021.
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Article Published/Sorted/Amended on Scopulus 2021-03-11 22:49:50 in Tax Articles