Most publishers know the headline: magazines are zero-rated. That's true, and for a simple print subscription it's the end of the story.
The trouble is that very few subscription offers are that simple any more. There's a digital edition, a conference place, a data tool, a free gift and a reader in Germany. Each of those can change the answer.
I'm not a tax adviser, and this isn't tax advice. Your accountants will have the final word. But HMRC's own guidance is clearer than people expect, and it's worth knowing what it says before you set up your next offer.
Print: zero-rated, with a definition
Newspapers, journals and periodicals are zero-rated under HMRC's VAT Notice 701/10. So are books, brochures, pamphlets and leaflets.
There's a definition behind it, though. HMRC describes journals and periodicals as magazines issued in a series at regular intervals, more often than once a year. It also says publications that mainly promote your own products or services aren't journals or periodicals. That catches some customer magazines and brand titles, so it's worth checking if yours sits near that line.
Postage follows the goods. HMRC's Notice 700/24 says delivery of printed matter to the customer under contract, for a charge, is a supply of zero-rated printed matter. So a separate "postage and packing" line on a print subscription is normally zero-rated too.
Digital editions: zero-rated since May 2020
Since 1 May 2020, the same categories have been zero-rated when supplied electronically. HMRC's e-publications guidance lists newspapers, journals and periodicals, including magazines.
That covers more than a PDF of the printed issue. Section 9 of Notice 701/10 says periodically updated online newspapers can qualify, and aren't limited to static digital versions of print. HMRC's manual also says a fee for access to a number of zero-rated e-publications is zero-rated, which is what most digital subscriptions are.
There are limits. An e-publication is standard-rated if more than half of it is devoted to advertising, audio or video content. Audiobooks are standard-rated. Apps and software used to read the publication are standard-rated as well.
For B2B publishers, the one to watch is everything around the publication. A searchable data tool, a webinar library or a training course isn't a newspaper or a periodical, so don't assume the zero rate carries across just because it's on the same login.
Print and digital bundles
HMRC gives a direct example. A subscription to an e-newspaper and a printed newspaper is zero-rated. Both parts are zero-rated, so there's nothing to split.
It gets harder when a bundle mixes zero-rated and standard-rated things. Section 6 of Notice 701/10 sets out the test:
- Single supply. If one element is the principal thing and the rest just help the customer enjoy it, the whole thing takes the VAT treatment of the principal element.
- Multiple supply. If an element is distinct and independent, it's a separate supply, and you must apportion the price between the elements at their own rates.
So a subscription that includes a place at your annual conference, a printed directory and access to an online database might be three or four supplies, not one. Where a fee gives access to a mix of standard-rated and zero-rated e-publications, HMRC says you'll need to apportion it.
The apportionment needs to be fair and reasonable, and you need to be able to show how you did it. Agree the split with your accountants once, write it down, and apply it the same way every time. Working it out by hand at month-end is how two people end up with two different VAT figures.
Cover gifts and free extras
Consumer titles in particular should know the cover-mount rule in section 6.7. A free item with a magazine can be treated as part of the zero-rated supply if you don't charge separately for it, copies with and without it sell at the same price, and its cost stays within HMRC's limit (no more than 20% of the total cost of the combined supply, excluding VAT, less £1).
A welcome gift on a subscription offer is a different question from a cover-mount, so check that one with your adviser rather than assuming the same rule applies.
Readers overseas
Print copies are zero-rated printed matter in the UK wherever they're posted. The reader's country may have its own rules on arrival, which is a conversation to have with your mailing house.
Digital is where it changes. For consumers in the EU, VAT on digital services is normally charged at the rate in the reader's country. A business that isn't established in the EU can account for it through the EU's non-Union One Stop Shop rather than registering in each country. For business customers who give you a valid VAT number, the customer usually accounts for the VAT themselves.
That's why the questions at checkout matter: is this a business or a consumer, what's their VAT number, where's the invoice going and where's the copy going? If you don't capture those, you can't apply the right rate.
Getting it right in your system
The VAT rules themselves don't change often. The mistakes come from the set-up:
- Flag every price as print, digital or both. And set the VAT-able share for bundles there, not on a spreadsheet.
- Capture VAT numbers at the point of sale. Chasing them after the invoice has gone out is painful.
- Record the invoice and delivery countries separately. Corporate subscriptions often have a head office in one country and readers in another.
- Test a rate change before it goes live. Run a few known cases through and check the answer.
- Review new products. Every time marketing builds a new bundle, ask which parts are zero-rated and which aren't.
The split matters for revenue as well as VAT, because each part of a bundle should be released on its own schedule. Our post on deferred revenue for subscriptions covers that side.
Where we fit in
In Avio, our subscription platform for larger publishers, VAT is worked out by a rules engine from the customer's VAT number, the invoice and delivery countries, EU or non-EU status and separate print and digital rates. Each price carries its own VAT-able percentage, which is how a bundle with print and digital parts gets taxed correctly. There's a test tab to try a case before a rule goes live. The orders and subscriptions page shows how prices and bundles are set up.
If you're comparing systems more generally, our guide to subscription software has a list of UK specifics, VAT included, to check before you commit.
If you'd like to see how Avio handles a tricky bundle on your own prices, book a demo, or just get in touch with a question.
Rob Sherwood is Managing Director of Adept Data Services. He has spent his career in subscriptions and circulation, at WDIS, Optima and CDS Global before founding Adept.