Gardarsson (t/a Action Day a Islandi)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 July 2019 |
| Date | 08 July 2019 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 441 (TC)
Judge Amanda Brown, Sheila Cheesman
Mr Thorsteinn Gardarsson appeared in person.
Mr Dermot Ryder, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents.
Value added tax – Zero-rating – Whether action day planner is a book – Yes – Appeal allowed.
The FTT ruled that a product known as the “action day planner” was a zero rated book, not a standard rated diary, because it contained material aimed at teaching time management skills.
The appellant is an Icelandic company which sells an “Action Day Planner” to UK consumers via Amazon market place. Following a routine check on non-established persons trading via the marketplace, HMRC determined that the product was standard rated stationery and assessed the company for underdeclared VAT and a late registration penalty. The appellant maintained that the product was a zero-rated book.
The day planner is marketed as a time management tool. It comprises 16 pages of text concerning time management followed by 52 double pages of planners which are dated and laid out in a way similar to a diary.
In deciding whether the product was standard or zero rated, the FTT considered the High Court decision in Colour Offset Ltd [1995] BVC 915 which confirmed that “where an item contained reading material and space for writing it was necessary to determine the main function of the article” (para. 18).
After “much debate” the FTT accepted that “the section at the start of the book is educational” and the “main function [of the book] is to teach the user how to better or more effectively manage time. The writing space being, in substance, no different from a GCSE student filing out answers to a practice papers or someone completing a crossword puzzle.” (para. 34).
The appeal was dismissed and the product ruled to be zero-rated.
Without the Action Day Planner to hand it is difficult to properly appreciate the FTT's reasoning. However, the principle applied is clear, the FTT focussed on determining what, on balance, was the main function of the product and the appellant managed to demonstrate that its main function was as an educational tool.
[1] This appeal was bought in respect the decision by HM Revenue & Customs (“HMRC”) that Thorseinn Gardarsson (“the Appellant”) was liable to be registered for VAT with effect from 26 July 2013 as a consequence of sales made of the product known as the Action Day Planner (“the ADP”) in the UK. HMRC considered that the ADP was not a product eligible to be taxed at the zero rate and accordingly raised assessments to tax and associated inaccuracy penalty assessments together with a penalty for failure to notify a liability to be registered for VAT.
[2] However, at the heart of the appeal was a dispute was whether the ADP was liable to VAT at the zero or standard rate. If, as the Tribunal has concluded, the ADP is a zero rated book the assessments to tax and penalties all fall away.
[3] The Appellant's resides and operates his business from Iceland. He is an Amazon market place trader and effects sales of the ADP to customers in the UK through that platform. He began trading into the UK on 26 July 2013.
[4] On 19 July 2017, as part of a routine check on what are known as non-established taxable persons, HMRC began an enquiry into the VAT registration status of the Appellant.
[5] In response to that enquiry the Appellant claimed that the ADP was a zero rated book and that whilst he had submitted an application to be registered for VAT purposes on 4 July 2017 he considered that no VAT was payable.
[6] Following further investigation into the ADP HMRC concluded that the ADP was not a book but was unused stationery falling outside the eligibility to be zero rated and thereby subject to VAT at the standard rate.
[7] On 4 October 2017, having established that the Appellant's Amazon trading account indicated that he had begun importing the ADP into the UK with effect from 26 July 2013, HMRC revised the Appellant's effective date of registration to 26 July 2013.
[8] On 17 November 2017 HMRC issued an assessment to VAT for prescribed accounting period 08/17 in the sum of £12,769.59. An assessment for the long first prescribed accounting period 26 July 2013 to 30 June 2017 in the sum of £158,024.77 was issued on 21 March 2018.
[9] A late notification penalty in the sum of £33,188.98 and an inaccuracy penalty in the sum of £1,915.43 were also issued on 22 November 2017.
[10] The Tribunal were shown an example of the ADP and find the following facts in relation to it:
(1) The external appearance if the ADP is that of a black leather/leather substitute covered book larger than A5 but smaller than A4 (its dimensions are 20.3 × 15.2 × 1.3cm). It has an elastic strap attached to the inside of the back cover that can be wrapped around the front to hold it closed. The Tribunal understands the ADP cover is available in different colours and a larger version is also available.
(2) Inside it has 115, 100gsm, slightly off white, pages.
(3) The ADP is described as a time management tool developed to “help people to grow; to teach and instruct people time management skills”. It is an interactive tool intended to facilitate the discipline of time management, step by step building habitual behaviour.
(4) The first 16 pages of the ADP contain text setting out a narrative of the ethos articulated by the Appellant for effective time management following themes of “attitude”, “goals” and “actions” together with the “discipline of rituals”.
(5) The remainder of the ADP is taken up with 52 double page planners. The layout follows the methodology advocated in the first 16 pages with space to set out “tasks to execute”“delegation and teamwork” a column for each day of a week and “goals/projects I am going to work on this week”. The columns for each day represent a little over one quarter of each double page.
(6) The 52 double pages are dated and the ADP is produced for a calendar or academic year.
(7) At the back is a cardboard slip pocket.
(8) The ADP retails for approximately £20.
[11] Section 30 Value Added Taxes Act 1994 (“VATA”) provides:
(1) Where a taxable person supplies goods or services and the supply is zero rated, then whether or not VAT would be chargeable on the supply apart from this section:
- no VAT shall be charged on the supply; but
- it shall, in all other respects, be treated as a taxable supply;
and accordingly the rate at which VAT is treated as charged on the supply shall be nil.
(2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the supply is of a description for the time being so specified.
[12] So far as relevant Schedule 8 VATA provides:
Group 3
Item 1 – Books, booklets, brochures, pamphlets and leaflets
[13] So far as relevant Schedule 1A VATA, Registration in respect of taxable supplies: non-UK establishment, provides:
(1) A person becomes liable to be registered under this Schedule at any time if conditions A to D are met:
(2) Condition A is that:
- The person makes taxable supplies, …
(3) Condition B is that those supplies … are … made in the course or furtherance of a business carried on by that person.
(4) Condition C is that the person has no business establishment, or other fixed establishment, in the United Kingdom in relation to any business carried on by the person.
(5) Condition D is that the person is not registered under this Act.
(1) A person who has become liable to be registered by virtue of paragraph 1(2)(a) … must notify the Commissioners of the liability before the end of the period of 30 days beginning with the date on which the liability arises.
(2) The Commissioners must register any such person (whether or not the person so notifies them) with effect from the beginning of the day on which the liability arises.
(1) The Commissioners may exempt a person from registration under this Schedule if the person satisfies them that the taxable supplies that the person makes …
- are all zero rated …
(2) The power in sub-paragraph 1 is exercisable only if the person so requests and the Commissioners think fit. …
[14] HMRC's interpretation of the zero rating provisions for books are set out in VAT Notice 701/10: zero rating of books and other forms of printed matter. It provides:
The words in Group 3 are used in their ordinary, everyday sense. This means they are restricted to goods produced on paper and similar materials such as card. Most items qualifying for zero-rate will be products of the printing industry (including items printed in Braille), but goods which are photocopied, typed or hand-written will, in some cases, also qualify.
3.1 Books and booklets
These normally consist of text or illustrations, bound in a cover stiffer than their pages. They may be printed in any language or characters (including Braille or shorthand), photocopied, typed or hand written, so long as they are found in a book or booklet form.
Supplies of any of the following are zero rated:
- Literary works
- Reference books
- Dictionaries or catalogues
- Antique books
- Collections of letters of documents permanently bound in covers
- Loose-leaf books, manuals or instructions, whether complete with their binder or not
- Amendments to zero-rated books loose-leaf books, even if issued separately
School books and other...
To continue reading
Request your trial