15 May 2020 11:17 AM

After years of lobbying, the government announced in the March 2020 Budget that 20% VAT would no longer be collected on the sale of e-publications, with the change originally intended to take effect from 1 December 2020. However, following the outbreak of the Covid-19 pandemic, the date was brought forward to 1 May 2020.

The change means e-publications are now zero-rated the same as print books, so prices should be cut by a sixth. E-books could therefore be over £2 cheaper, with a tax saving of £20 to £25 on typical e-newspaper or e-magazine subscriptions. The reason for the previous difference in VAT treatment was because e-publications were classified as software.

What now qualifies for zero-rating and what does not?

Zero-rating has been extended to include books, newspapers, journals and periodicals (including magazines) and children’s picture and painting books that are supplied electronically. However, the following items remain subject to VAT at the standard rate of 20%:

  • Audiobooks, since zero-rating is limited to electronic versions of books that can be read or looked at.
  • E-publications where more than 50% of the content consists of advertising, audio or video.
  • Intellectual property, along with electronically supplied plans or drawings for industrial, architectural, engineering and commercial purposes.

Audio books, despite being the preferred format for many people with sight loss, have not benefited from the change to the zero-rating rules. The continuing 20% VAT surcharge has already been heavily criticised and it would therefore be no surprise to see zero-rating extended to audio books before too long.

E-book readers and software

The devices and apps used to access e-books remain standard rated. Despite generally better battery life (and even waterproofing in some cases), dedicated e-book readers are less popular than a few years ago, with tablets and mobile phones the preferred choice for many readers.

If you produce such publications, you will need to make sure you fully understand the rules change. Check here for full details of which types of e-publications now qualify for zero-rating.