E-day comes early for the publishing industry
It was to be the 1st December 2020 but it has been brought forward to today, 1st May 2020 because of the increase in demand for e-publications during the coronavirus lockdown.
It is important to understand the government has changed the law to allow the zero rating of only certain e-publications. Significantly, it does not cover a wide range of e-publications typically produced in the advertising and marketing sector. The items of printed matter which have always been zero rated are as follows:
- books and booklets
- journals, periodicals and magazines
- children’s picture and painting books.
The aim of the change is to apply the same rate of VAT to electronic versions of the above. The point is that if the item is zero rated in printed form then the electronic version should also be zero rated.
However there are two important caveats
The first caveat is linked to advertising and marketing. An e-publication which is ‘wholly or predominantly devoted to advertising’ cannot be zero rated. HMRC guidance about this states ‘If more than half of an e-publication is devoted to advertising’ it cannot be zero rated.
With regard to leaflets, brochures and booklets, these are commonly used for advertising purposes and thus the above caveat will apply to electronic versions. So for example you may produce a leaflet advertising a product. The printed matter version may be zero rated, the electronic version cannot be.
The second caveat concerns e-publications which are predominantly of audio or video content. These cannot be zero rated.
Although this is a significant change for e-publications we need to emphasise what has not changed:
- There isn’t any change to how VAT applies to charity advertising.
- The extra-statutory relief for charity fund raising materials (e.g. appeal letters and envelopes) is unchanged and only applies to printed matter.
- The package test is for packages of printed matter, not bundles of e-publications.
- An e-publication is only zero rated if the printed version is also zero rated.
- An e-publication is standard rated if more than half of it is devoted to advertising, audio or video content.
For more information please go https://www.gov.uk/guidance/zero-rate-of-vat-for-electronic-publications