A tax tribunal in the UK, as part of a long running legal saga played out over the respected News Corp-owned London news outlet, has set a new precedent in how some online news content is to be treated for the purposes of tax, specifically value added tax. The tribunal has ruled that subscriptions to online editions of The Times and The Sunday Times are now to be considered ‘zero-rated’ for VAT, having been officially categorised as being eligible for the same VAT relief afforded to their old-fashioned printed versions of The Times and Sunday Times.
Parent company, Rupert Murdoch’s News UK, will now be potentially looking to claim back tens of millions of pounds in back taxes, should the new rules be applied retroactively. So far it’s not clear whether or not the ruling will allow for previous taxes to be claimed back retroactively, although this would not seem a too distant possibility, especially considering the Murdoch dynasties’ traditionally close relationship with the UK government.
The upper tax tribunal’s decision hinged on the determination that, because The Times’ website is only updated “periodically” – at set intervals of four times a day – in contrast with other online news outlets like the BBC or websites belonging to papers such as The Guardian and Independent, which are all updated on a continuous and rolling basis – as and when new news stories come in – (a distinction that has only now been given such monetary significance) – it can be classed as a ‘digital newspaper’ and as such can now avoid paying the twenty percent value added tax, in line with traditional print newspaper, ie the kind you can hold and shake the creases out of, or wrap your cod and chips in; being ‘zero-rated’ for the purposes of VAT.
In its ruling the tribunal claimed that it is “an essential characteristic of a newspaper that it is produced in periodic editions,” a rather arbitrary distinction that brings memories flooding back of the infamous Jaffa Cake tribunal of 1992.
In that farcical tribunal – now the stuff of tax law legend – during which the McVitie’s biscuit company famously produced a giant Jaffa Cake in court in order to illustrate their point, and were ultimately successful in defending their embattled orange-filled chocolate snacks against the shocking allegations that they were in fact, chocolate covered biscuits merely feigning their supposed cake-status in an insidious plot to avoid paying taxes that would otherwise be owed to HMRC.
In coming to his momentous decision (quite possibly the most important judgement in his career), the judge in the case had to weigh up a few very important considerations; “a Jaffa cake goes hard like a cake rather than soft like a biscuit” he reasoned (ooh err, your honour!) against the fact that Jaffa Cakes are “eaten with the fingers, whereas a cake may be more often expected to be eaten with a fork.” In the end Jaffa Cakes were deemed to be cakes and allowed to keep their VAT zero-rated status, leading to HMRC’s website containing such pearls of wisdom as:
“The significance of the borderline between cakes and biscuits is that a cake is zero-rated even if it is covered in chocolate, whereas a biscuit is standard-rated if wholly or partly covered in chocolate or some product similar in taste and appearance.”
Traditional print newspapers have had a longstanding relief from VAT since as far back as 1972, as their consumption has presumably been deemed in some way beneficial to the general public, allowing readers to perhaps become more engaged and politically active citizens, involving themselves more in current public discourse, maybe. I imagine when the relief was first brought into law in 1972, newspapers more often than not actually provided serious news content and commentary, not lurid nonsense about Love Island contestants or Gemma Collins’ latest waist size. The government’s guidance actually states that “publications which do not contain a substantial amount of news are not newspapers” and hence not entitled to the VAT relief.
That being said, The Times, whilst not commanding the great respect it did once upon a time, is at least a serious publication (unlike some of Murdoch’s more tabloid style offerings such as The Sun), and besides, the VAT zero-rating does in fact cover other written material too; for example; most books, sheet music, leaflets, journals, children’s illustrated books and printed maps to name but a few examples, and I would be the last person to advocate for a situation in which the government decides what is in the interest of the public to read about, setting preferential tax rates in accordance with their own views over what is and isn’t newsworthy. That sounds a little too 1984 for my comfort…
All cynicism aside, I am, personally at least, broadly supportive of tax relief on printed material; it seems sensible to allow for the free publication of written material, and hence the free flow of ideas and opinions, without the hindrance of a sales tax (or more accurately a ‘value added’ tax), especially considering the low retail price of newspapers and to a lesser extent print medium in general.
It is definitely a positive step that a tribunal has taken into account the changing nature of news content and consumption in the modern era, and allowed online news services to benefit from the same tax benefits that a traditional, fish and chip wrap newspaper would enjoy. So far, the government seems to have been incapable of writing laws suitable for the taxation of modern online platforms, meaning there will likely be more tribunals of this nature to look forward to.
Time for reform?
More reform of the tax code to allow for the government to raise the revenue it needs to function, in a way that is both fair and in keeping with the realities of the 21st century is greatly needed, but surely it represents a failure of the original legislation that it should need a tribunal to rule over its meaning?
Whilst courts and tribunals carry out a valuable function in our democratic society, the government should surely act proactively to legislate to meet the growing challenges of tax collection in the new digital economy, rather than leaving old, archaic and ambiguously worded legislation to be argued over; like the essential parameters of what constitutes a Jaffa Cake, or a newspaper; in hugely expensive tribunals and court cases.
The last thing we need now is a spate of ever more farcical tribunals debating frankly ridiculous distinctions and the associated tax reliefs that may or may not be applicable. This mess is in desperate need of sorting out once and for all. Let’s not let HMRC throw its weight around, or let our elected representatives take the easy road and defer to the judiciary to sort out the mess they have created, or at the very least allowed to stand unchanged, with their dated and inadequate legislation.