News Corporation UK & Ireland Ltd v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 December 2019 |
| Neutral Citation | [2019] UKUT 404 (TCC) |
| Date | 24 December 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 404 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Zacaroli, Upper Tribunal Judge Greg Sinfield
Jonathan Peacock QC and Edward Brown, instructed by Deloitte LLP appeared for the appellant
Nigel Pleming QC and Eleni Mitrophanous, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Zero rating – Whether electronic editions of newspapers zero rated as newspapers – EC Directive 2006/112, art. 110 – VATA 1994, Sch. 8, Grp. 3, item 2 – The always speaking doctrine – Appeal allowed.
In an appeal against the FTT decision in News Corp UK & Ireland Ltd [2018] TC 06385, the Upper-tier Tribunal (UT) have ruled in favour of the appellant and reversed the original decision, instead concluding that a digital edition of a newspaper can be zero rated under VATA 1994, Sch. 8, Grp. 3, item 2.
In News Corp UK & Ireland Ltd v R & C Commrs [2020] BVC 522, the principle question was whether digital versions of newspapers published by the appellant were “newspapers” within VATA 1994, Sch. 8, Grp. 3, item 2 and zero rated for VAT purposes.
News Corp UK & Ireland Ltd was the representative member of a VAT group that publishes, principally, The Times, The Sunday Times, The Sun and The Sun on Sunday.
The FTT had previously concluded the digital versions were equivalent to the newsprint editions but, crucially, constituted a supply of services and were therefore not included in item 2, which should be construed strictly, prohibiting the “always speaking” doctrine.
The UT re-examined the proper construction of the word “newspaper” and considered, whether,
- the meaning of the term was sufficiently broad to include the digital versions now available;
- if not, whether the always speaking doctrine was permissible; and
- if the always speaking doctrine did apply whether the term, interpreted in this light, included the digital versions.
EC Directive 2006/112, art. 110 permits the preservation of member state's domestic laws for zero rating which were in existence at 1 January 1991 for clearly defined social reasons. It was common ground the purpose of item 2 was to promote literacy, the dissemination of knowledge and democratic accountability by having informed public debate. It had first been enacted as part of the Finance Act 1972. The appellant argued the meaning of “newspapers” in this context was broad enough to include the digital versions now available. Alternatively, since the drafter of the legislation in 1972 could not have contemplated a supply of digital versions of newspapers, the “always speaking” doctrine should be applied.
The “always speaking” doctrine is a construction that takes account of relevant changes since legislation was originally framed but doesn't alter the meaning beyond the principles originally envisaged.
The UT concluded the FTT was wrong to consider the fact a provision had to be construed strictly meant the always speaking doctrine cannot apply. Following the approach of Lord Kitchin in SAE Education Ltd v R & C Commrs [2019] BVC 13, the UT noted a strict interpretation of item 2 was required but not so strict as to deprive it of its intended effect. It did not mean the most restricted meaning had to be given.
The UT further disagreed with the conclusion of the FTT that VATA 1994, Sch. 8, Grp. 3, item 2 was intended to be limited to items that were goods. VATA 1994, s. 30 provides for the zero rating of supplies of goods or services specified in Schedule 8. Each of the items in Grp. 3 existed, in 1972, in a physical form but that did not mean anything that did not was necessarily excluded. The legislation was neutral on how the newspaper was delivered.
Nor did the always speaking doctrine cease to apply from 1 January 1991 because a standstill was imposed by art. 110. The term “newspaper” could be construed as including the digital versions that have come into existence since 1991 if they were found to be characterised the same as the things the pre 1991 legislation zero rated.
It had been a finding of fact, by the FTT, that the digital editions were essentially the same as, or very similar to, the newsprint editions. They were edition-based publications with similar characteristics to the print versions. The content was fundamentally the same, or very similar, and updates were relatively minor as was the additional content or functionality available by reason of the digital technology. This finding was challenged by HMRC who pointed to a “rolling news” element said to be available pre-March 1996. The evidence in relation to this was contradictory, however, and the FTT were entitled to find as they did.
The UT therefore considered whether the digital versions, with the characteristics identified by the FTT, fulfilled the legislative purpose of item 2 and found they did. The UT also found the essential characteristics of a newspaper – that it was edition based and contained curated news – were as much characteristics of the digital versions as they were the print versions. Moreover, the invention of a digital form of newspaper was precisely the type of technological development the “always speaking” doctrine was designed to address. The UT did not consider this was an extension of the scope of item 2.
Finally, HMRC contended EC Directive 2006/112, art. 98 applied and referred to the judgement in EC Commission v Luxembourg (Case C-502/13) [2015] BVC 15. The UT disagreed noting that art. 98 applied to reduced rates and it had been common ground the EU had not so far legislated in respect of zero rating, aside from art. 110 which defers, in this instance, to UK domestic legislation. It is the domestic legislation dating from 1972 that must be construed with the benefit of the “always speaking” doctrine.
A new amendment to EC Directive 2006/112 effected by EC 2018/1713 was also not relevant.
Appeal allowed.
This decision is a significant win for the appellant but its potential impact across media organisations and in relation to other electronic publications means it is likely to be appealed by HMRC.
[1] The principal question at issue in this appeal is whether digital versions of newspapers published by the appellant, News Corp UK & Ireland Limited (“News UK”) are “newspapers” within the meaning of Item 2, Group 3 of Schedule 8 (“Item 2”) to the Value Added Tax Act 1994 (“VATA”) and are therefore zero rated for VAT purposes.
[2] News UK is the representative member of a VAT group that publishes, principally, The Times, The Sunday Times, The Sun and The Sun on Sunday.
[3] In a decision released on 8 March 2018 (the “Decision”), the First-tier Tribunal, Judge Guy Brannan, (“FTT”) concluded that, although the digital versions are the equivalent to the newsprint editions, they are not “newspapers” within the meaning of Item 2. News UK appeals against that decision, with the permission of the FTT granted on 7 June 2018.
[4] This appeal relates to the periods September 2010 to June 2014, and 28 January 2013 to 4 December 2016.
[5] The only provision of Council Directive 2006/112/EC (“Principal VAT Directive” or “PVD”) which deals with zero-rating is article 110. This provides:
Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in article 99 may continue to grant those exemptions or apply those reduced rates.
The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.
[6] The purpose of article 110 is to permit the preservation in each Member State (so far as zero-rating is concerned) of the treatment under that Member State's domestic law for zero-rating of items, which existed as at 1 January 1991. This was intended to be a temporary measure, pending introduction of “definitive arrangements”: article 109. No such definitive arrangements have yet been introduced.
[7] So far as the UK is concerned, article 110 has the effect of preserving the measures for zero-rating that were enacted immediately prior to the UK joining the EU, it being common ground that the relevant UK legislation has not changed in any material respect since 1972. The relevant provisions are now to be found in s.30 and Schedule 8 of VATA. Section 30(2) provides:
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.
[8] The relevant part of Schedule 8 is Group 3, which lists the following items:
- Books, booklets, brochures, pamphlets and leaflets.
- Newspapers, journals and periodicals.
- Children's picture books and painting books.
- Music (printed, duplicated or manuscript).
- Maps, charts and topographical plans.
- Covers, cases and other articles supplied with items 1 to 5 and not separately accounted for.
[9] These provisions were first enacted as part of the Finance Act 1972. The wording of s.30(2) and Group 3 of Schedule 8 VATA is precisely the same as the wording of s.12(2) and Group 3 of Schedule 4 to the Finance Act 1972. The notes to Group 3 have, however, been added to since 1972. Given the importance placed on the notes by the FTT (as we explain below), we here set out their development.
[10] In the Finance Act 1972 there was a single note to Group 3, which read:
This Group does not include plans or drawings for industrial, architectural, engineering, commercial or similar purposes.
[11] This note was deleted by the VAT (Consolidation Order) 1978 which substituted the following:
Items 1 to 6:–
- do not include plans or drawings for industrial, architectural, engineering, commercial...
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