A planned zero rate of VAT for e-books and e-newspapers will be implemented seven months ahead of schedule, and VAT on personal protective equipment (PPE) for COVID-19 will be temporarily scrapped, HM Treasury announced.
“We want to make it as easy as possible for people across the U.K. to get hold of the books they want whilst they are staying at home and saving lives,” Chancellor of the Exchequer Rishi Sunak said in an April 30 release. HM Treasury estimated that the move could reduce the cost of a £12 e-book by £2, and the cost of a digital newspaper subscription by up to £25 a year.
Prime Minister Boris Johnson announced the same day that, of people who tested positive for coronavirus in the United Kingdom, 26,711 have died in hospitals or in other settings. But he declared that “we are past the peak of this disease . . . and we are on the downward slope.”
Johnson said he will set out a comprehensive plan in the week of May 4 to “explain how we can get our economy moving . . . [and] continue to suppress the disease and at the same time re-start the economy.” He added: “But there will be five key tests that we must satisfy before we can put that plan into action. We must be sure that we can continue to protect the National Health Service and its ability to cope. We must see a sustained fall in deaths. We must be sure that the infection rate is falling. We must overcome the operational and logistical challenges on testing and PPE. Fifth, and this is the most important, we must all make sure that the measures we take do not risk a second spike that would overwhelm the NHS.”
‘Abolishing the Reading Tax’
“A world-class education will help the next generation to thrive. Nothing could be more fundamental to that than reading, and yet digital publications are subject to VAT. That can't be right, so today I am abolishing the reading tax,” Sunak said during his March 11 budget speech. “From December 1 . . . books, newspapers, magazines, or academic journals, however they are read, will have no VAT charge whatsoever,” he added.
“The government has decided to bring forward the implementation date to May 1 to reduce the cost of access to online publications during these challenging times when many people are confined to their homes and schools are closed,” HM Revenue & Customs said in an April 30 tax information and impact note. The change is set out in The Value Added Tax (Extension of Zero-Rating to Electronically Supplied Books etc.) (Coronavirus) Order 2020.
The United Kingdom remains subject to EU law during the Brexit transition period. Council Directive 2018/1713 changed the scope of the EU’s optional reduced rate provisions, HMRC noted. “Where member states . . . have a reduced rate (or an equivalent zero rate) for supplies of printed publications, [the directive] gives them the option to extend that reduced or zero rate to supplies of electronic versions of those publications. The U.K. has decided to exercise this option to extend its maintained zero rate to supplies of certain specified electronic publications,” HMRC said. It added that the sale of e-audio books “continues to be standard rated in U.K. law in line with government policy.” HMRC provided additional guidance in Revenue and Customs Brief 3 (2020).
“In support of the print newspaper industry, the government . . . will be spending up to £35 million on newspaper advertising over the next three months as part of its COVID-19 communications campaign to ensure the whole U.K. is aware of the latest government guidance and advice,” Treasury added.
The Financial Times reported that the VAT pledge was brought forward amid concerns that newspapers are struggling to survive the coronavirus pandemic. “The newspaper industry is experiencing a bizarre phenomenon, a surge in online popularity amid a commercial meltdown,” Guardian columnist Simon Jenkins wrote on April 24.
Personal Protective Equipment
Supplies of PPE to care homes, businesses, charities, and individuals to protect against COVID-19 will be zero-rated from May 1 until July 31, Treasury said in a separate release on April 30.
The government estimates that the move will save care homes and businesses more than £100 million, and “will particularly benefit care providers, who are often unable to reclaim the 20 percent VAT they incur on their purchases.”
The change is set out in The Value Added Tax (Zero Rate for Personal Protective Equipment) (Coronavirus) Order 2020, and details of the products covered by the temporary zero rate are listed in Revenue and Customs Brief 4 (2020). HMRC has also provided a tax information and impact note.
“The government is acting under an exceptional basis allowed by EU rules during health emergencies,” Treasury said. It had announced on March 31 the removal of customs duty and import VAT from PPE until July 31. The European Commission said on April 3 that it had approved requests from member states and the United Kingdom to “temporarily waive customs duties and VAT on the import of medical devices, and protective equipment, from third countries in order to help in the fight against coronavirus.”