News UK has successfully argued at a tribunal that its digital editions of the Times, Sunday Times and Sun should enjoy a zero rate of value-added tax.
The digital offerings of newspapers and magazines are currently subject to a 20 per cent standard VAT rate while printed publications are zero-rated.
The ruling sets a new precedent for newspapers and magazines that offer subscribers a digital edition identical to their print title.
News UK took HM Revenue and Customs to tribunal over the issue of its VAT payments, but initially lost the case in March 2018. The decision was overturned last month after News UK filed an appeal.
The news group, owned by Rupert Murdoch, had argued that the meaning of “newspapers” in the legislation was broad enough to include the digital versions even though they did not exist at the time it was written.
It relied on the “always speaking” principle of statutory interpretation that takes into account changes that were unforeseen when the legislation was written.
Since March 2016 the Times website has published one core edition each day which is then updated at 9am, 12pm and 5pm. This same editions-based model, as opposed to rolling news, also applies to its mobile app.
The title also has an e-reader edition, also known as a page-turning edition, which is an exact copy of the second print edition of the paper, and a tablet edition which is the same but is sometimes updated with breaking news.
Each of the editions include additional content not included in print, such as videos, alternative images, interactive puzzles, charts and graphics, and links to podcasts.
The ruling also applies to the Sun’s newspaper app, which gives subscribers a PDF version of the daily paper.
Jonathan Peacock QC, for News UK, said at an Upper Tribunal hearing held in October that it was necessary to show the online services “shared the essential characteristics of a ‘newspaper’”, which might not apply if it ran a rolling news website model like many of its peers.
In their ruling, tribunal judges Mr Justice Zacaroli and Judge Greg Sinfield said: “If such a website lacks two features, namely that it be edition based and contains curated news, i.e. there is editorial judgment in deciding what stories to include in the newspaper, then it would not have two of the characteristics which News UK accepts are essential for newspapers.”
They added that these characteristics could be equally applied to the digital and print editions, and that this was most demonstrable with the e-reader version as it has “no relevant distinction” from the print newspaper.
“It promotes literacy, the dissemination of knowledge and democratic accountability by having informed public debate in precisely the same way as the print version,” they wrote.
It was “therefore difficult to discern any legislative purpose for excluding” the edition from the zero rate of VAT, the judges said.
Backing News UK’s use of the “always speaking” principle, the judges said the invention of a digital form of newspaper was “precisely the type of technological development” that it was intended to address as it was “sufficiently similar that the legislative purpose extends to both”.
HMRC said it is “carefully considering” the decision as it decides whether to appeal to the next court.
Owen Meredith, managing director of the Professional Publishers Association, told Press Gazette he understands the ruling is unlikely to apply to the majority of news publishers who update on a more frequent basis than the Times website.
But it may benefit the organisation’s magazine members who publish the “same content on the same release date [as the printed title] but plus 20 per cent VAT”, he said, such as Vogue and The Economist.
The PPA will also continue its “axe the reading tax” campaign at the first budget of the new Government in March, hoping all digital publishers will be able to benefit from a similar windfall.
Meredith said: “We know that quality journalism comes in many forms and across many platforms and we don’t think there should be a platform penalty for that content however it is delivered to readers.”
The call has been picked up by the Cairncross Review and the Digital, Culture, Media and Sport Select Committee.
Meredith said: “There’s a lot of weight of evidence in terms of reviews that have looked at this to say it isn’t a silver bullet, but there is clearly an anomaly here that print publications are zero-rated and their digital editions are not.”
European Union finance ministers ruled in 2018 that members states could bring VAT on digital publications in line with print titles, ending a block on UK lawmakers doing so. Some 13 countries have already begun to take action to align the VAT rates.