1. Scope of this guidance
This guidance assists Assurance Officers and other staff in determining the liability of supplies of items of printed matter in relation to Group 3 of Schedule 8, VATA 1994.
In common with many other zero rates, the VAT relief for books etc has strong parallels with purchase tax legislation, which allowed exemption for newspapers, fully printed books, magazines, reviews, trade journals, periodicals and advertising material. In 1969 the Conservative party, then in opposition, committed itself to the zero-rating of books, journals and newspapers ‘on the general principle of avoiding a tax on knowledge’, and it reaffirmed this commitment when in office, in 1971. Thus zero-rating for printed and similar matter became a feature of VAT legislation from the outset.
Despite the above commitment, the law is not primarily based upon the ability of an article to disseminate knowledge. The law is closely related to both purchase tax legislation and the customs tariff, and relieves articles such as books, newspapers or maps, and not all intellectual material. It therefore follows that the starting point in considering whether an article is eligible for relief under Group 3 must be its physical characteristics and not its function.
3. UK law
Group 3 of Schedule 8, VAT Act 1994 allows relief for the following articles.
Books, booklets, brochures, pamphlets and leaflets.
Newspapers, journals and periodicals.
Children’s picture books and painting books.
Music (printed, duplicated or manuscript).
Maps, charts and topographical plans.
Covers, cases and other articles supplied with items 1 to 5 and not separately accounted for.
There are also two notes which state that Items 1 to 6:
(a) do not include plans or drawings for industrial, architectural, engineering, commercial or similar purposes; but
(b) include the supply of services described in paragraph 1(1) of Schedule 4 to this Act in respect of goods comprised in the items.
Note (a) is self-explanatory. Note (b) refers the services of hire or loan, which we cover in VBOOKS9000.
4. The role of the VAT Liability Team
The VAT Liability Team in VAT Directorate is responsible for the development and maintenance of policy relating to supplies of books and other printed matter.
They review areas where policy needs to be determined or has not been clearly determined. We also defend appeals that challenge our policy or legislation, write and maintain notices and guidance, and provide technical advice to Ministerial teams on our policy areas that may be conveyed to Ministers.
The VAT Advisory team is responsible for giving liability decisions on cases:
- where the guidance is unclear;
- where there is a challenge to the law;
- which involve new products and services;
- which are politically sensitive or of national importance;
- where guidance has specified that we must be consulted.
Before contacting VAT Liability Team for assistance on liability issues relating to supplies of books etc please make sure that you have read this guidance and Notice 701/10 Zero-rating of Books etc.
5. The approach to liability
The role of VBOOKS
VBOOKS3000 covers Items 1 to 6 of Group 3 of the Zero Rate schedule, and will enable you to decide whether the article which you are considering qualifies for relief under any of those items. You should only start with this section if you are satisfied that:
- your article is complete (this is covered in VBOOKS4000); and
- your article is to be judged solely on its value as a book etc (printed matter supplied with other goods and services is covered in VBOOKS5000 and VBOOKS6000).
If you are in doubt on either of the above points, you should refer to the appropriate section first.
How to judge the liability of an article
Although this section contains guidance on a number of example articles, the approach to judging liability is uniform across Items 1 to 5 of the Group. This follows two stages.
- First determine whether your article has the physical characteristics of any article mentioned in Items 1 to 5. If the answer is no, your article must be standard-rated.
- If the answer is yes, consider the function of your article. If that function is not primarily that of a book, brochure, newspaper, etc in the ordinary meaning of the word, your article must be standard-rated.
The sections covering Items 1 to 5 therefore start with a list of the physical characteristics which an article must possess. We then provide details and examples, which will enable you to judge the function of your article.
Bear in mind that an article which does not qualify for relief as one particular listed article may qualify as another. You will find guidance on this aspect in each section, under the heading Ways in which an article which has failed these tests may still qualify for zero-rating.
6. Scope of the law
Traders and the public will sometimes argue that, as the intention of Group 3 is to relieve articles which disseminate information or learning, articles other than printed matter which fulfil this role should also be eligible for zero-rating. On these grounds, the argument could extend to relief for tapes, or information transmitted by computer, for example. Likewise, traders may argue that articles of printed matter that do not fall within Group 3, but disseminate information, such as personalised letters, should be zero rated. Such arguments are based on a misunderstanding of the intention of Group 3. You may counter them as follows.
- The law is drafted to relieve certain specific articles such as books, newspapers or maps. If the intention had been to relieve all articles which disseminated information or learning, the law could have been readily drafted to achieve this. There are other areas of VAT law which work on a conceptual basis. The fact that Group 3 does not do so is an indication that the relief was always intended to be strictly limited.
- Any extension of Group 3 to accommodate such articles would be contrary to European Community law. This states that zero rates in force on 1 January 1991 may be retained subject to them being for clearly defined social reasons and for the benefit of the final consumer, but prevents the widening of the scope of existing zero rates or the introduction of new ones.
7. How to decide whether zero-rating applies
Ordinary and everyday meaning
The law names certain articles which are relieved, but makes no attempt to define those articles. In the absence of any legal definition, we do not seek to impose our own formal definition; instead we rely on the concept of the ordinary and everyday meaning of a word. Tribunals have accepted this concept and have consistently declined either to give their definition of a word, or to accept any dictionary or other definitions proffered by traders.
Physical characteristics and function
When judging whether an article meets the ordinary and everyday meaning of a word within Group 3, we look first to physical characteristics. The function of an article is a secondary question, and is only important if it is so far removed from the normal function of an article as to prevent that article qualifying as a book, leaflet, etc. in the ordinary meaning of those words.
The article is to be judged, not the method of production
We consider Group 3 to cover printed and similar matter. Printing is the traditional way of producing books, brochures, newspapers and so on; but documents produced by other means may still qualify - for example handwritten documents or photocopies. The test to apply is whether the document has the characteristics of any article mentioned in Group 3 - not how that document was produced, or what that document is a copy of.
Text in other formats
Supplies containing text in other formats such as audio or video cassettes or CD Rom are standard-rated. This includes the storage and distribution of text by fax, e-mail, microfiche or any similar process. It is fairly common for publications, for example, to be offered in hard copy or made available via the Internet. It may appear that the customer is essentially receiving the same supply, whichever delivery format he opts for. The VAT zero rate relief for books etc applies only to the hard copy physical supply of goods.
Transcripts or print-outs made of such information are zero-rated only if they are supplied in the form of books, booklets, brochures, pamphlets or leaflets.
The above policy is supported by the tribunal in Franchise Development Services Ltd LON/95/2530A (14295), which stated:
It appears clear to the tribunal on the normal usage of these terms that they relate to material printed, or produced in some similar way. They cannot be extended to cover a computer disk. The appellant submits that the legislation should cover computer disks and should be so interpreted, there being no distinction between a training programme on paper and one incorporated in a computer disk, and that the legislation should be interpreted to take account of the existence of electronic methods of storing information. The Tribunal does not find it possible to interpret the terms of item 1 so widely. First the terms used in Item 1 are specific, and extend to the class of matters which are normally reproduced on paper or other similar material, second, the legislation has made specific provision in Group 4 of Schedule 8 for certain kinds of electronically stored information, and third the provision for zero-rating, being exceptions to the general rule that goods and services are to be taxed at the standard rate, must be interpreted strictly and not extensively.
A supply of goods or a supply of services
Printed matter is a convenient means of communication and is frequently used as a medium in the course of a supply of services. You will need to determine exactly what your trader is supplying - for example expert or professional information that has been produced to the specific directions of the customer, or printed matter which is just the mechanical production of information. The supply of text by electronic transmission (including e-books), via the internet, or similar means is standard-rated. Such supplies are of services, not of goods, and different VAT rules will apply to them (such as those on the place of supply of services - see Notice 741A Place of supply of services).