Books: Processes leading to the production of printed matter: The role of sub-contractors
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|
|(ZR = zero-rated, SR = standard-rated)|
|1. Author produces the manuscript for a booklet & sells it to a publishing house.||SR 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.||SR supply of preparatory work.|
|3. Sub-contractor 2 prints, cuts, collates & stitches together booklets.||ZR supply. The act of stitching produces ZR goods. The printing, cutting & collating are supplied in conjunction with ZR printed matter & may also be ZR.|
|4. Sub-contractor 3 packages books.||SR supply of post-production service in isolation.|
|5. Publishing house supplies complete booklets to retailer.||Entire charge ZR as a supply of booklets.|