VBOOKS4600 - Books: Processes leading to the production of printed matter: The role of sub-contractors
Introduction
A printer with a contract to the final customer to supply zero-rated printed matter may zero-rate any preparatory work or post-production services, even if sub-contractors have been employed to perform some parts of the production process.
However, a sub-contractor can only zero-rate preparatory or post-production work when these are supplied in conjunction with zero-rated printed matter. For example, where a sub-contractor carries out typesetting only, his charge must be standard-rated; but if he goes on to produce zero-rated printed matter, he can zero-rate all of his charges to the main printer.
There will therefore be occasions when a sub-contractor will need to charge VAT for his contribution to the production process, although the main printer may zero-rate the same supply to the final customer. The following table provides an illustration of one such situation.
A possible situation illustrating VAT liability at different stages of the production process
| ### Supply | ### VAT treatment |
|---|---|
| 1. Author produces the manuscript for a booklet & sells it to a publishing house. | Standard Rate supply of preliminary services. |
| Publishing house agrees to supply 10,000 complete booklets to the retailer, at an inclusive price of £30,000. Publishing house employs sub-contracting companies as follows. | - |
| 2. Sub-contractor 1 type-sets manuscripts. | Standard Rate supply of preparatory work. |
| 3. Sub-contractor 2 prints, cuts, collates & stitches together booklets. | Zero Rated supply. The act of stitching produces Zero Rated goods. The printing, cutting & collating are supplied in conjunction with Zero Rated printed matter & may also be Zero Rated. |
| 4. Sub-contractor 3 packages books. | Standard Rated supply of post-production service in isolation. |
| 5. Publishing house supplies complete booklets to retailer. | Entire charge Zero Rated as a supply of booklets. |