In the Budget, the Chancellor has announced that the Government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020. This will extend zero-rating to e-books, e-newspapers, e-magazines and academic e-journals, but not to audio books.

The VAT liability of digital publications has been a contentious issue for many years as HMRC's view has always been that e-publications were not covered by the zero-rate under a strict interpretation of the VAT legislation. This position was recently challenged successfully in the Upper Tribunal decision in the case of News Corp UK & Ireland Limited which determined that the VAT treatment of the print and digital versions of newspapers should be the same.

HMRC have appealed this decision, however, whilst details have not been published yet, the Chancellor's Budget announcement indicates that the principles of the decision have now been accepted.

The decision in News Corp opens up the opportunity for VAT refund claims (subject to capping and unjust enrichment arguments) for businesses which have charged VAT on e-publications. Probably more importantly, charities and other businesses for whom VAT is an absolute cost have the opportunity to seek credit notes and refunds from their suppliers.

There could also be wider opportunities for businesses such as membership organisations or charities which provide e-publications as part of membership packages or subscriptions, to revisit apportionment methods and/or partial exemption methods.

If you would like to discuss the implications of the above, and the possible opportunity for VAT refunds in more detail, please get in touch with us on 0121 693 5000.