Revenue and Customs v News Corp UK & Ireland Ltd

A VAT zero-rate preserved by the standstill in article 110 must be construed strictly, but the always speaking principle remains relevant. The two principles operate together. An unforeseen development falls within the provision only where the statutory language, read in its full context, shows sufficient congruence with Parliament’s original policy and purpose.

The wording of Group 3 of Schedule 8 to the Value Added Tax Act 1994 confines its items, including “newspapers”, to tangible articles. Digital news services are intangible and do not fall within that category. Fiscal neutrality cannot enlarge a zero-rating provision beyond its expressed limits.

News UK supplied digital editions of The Times, The Sunday Times and The Sun during the relevant VAT periods. The First-tier Tribunal held that those services were not zero-rated newspapers. The Upper Tribunal reversed that decision, holding that the digital editions were newspapers under Item 2, Group 3 of Schedule 8 to the Value Added Tax Act 1994.

HMRC appealed. The central issue was whether the statutory term “newspapers”, construed under the always speaking principle and the EU-law limits on a retained zero-rate, included intangible digital news services. News UK also relied alternatively on fiscal neutrality.

1. Appeal allowed. The Upper Tribunal erred in holding that the digital news services were “newspapers” within Item 2, Group 3 of Schedule 8 to the Value Added Tax Act 1994. The First-tier Tribunal’s conclusion was restored.

2. The domestic term had to be construed by ordinary English-law principles, including the always speaking principle, without contravening applicable EU-law principles. Strict construction did not exclude the updating principle. Both principles conditioned the same construction exercise. The question was whether the statutory language, context and enacted policy showed sufficient congruence between the new development and Parliament’s original intention. A court could not fill a legislative gap: [2003] UKHL 13; [2020] UKSC 47.

3. Article 110 was a standstill provision preserving an existing national exception to the harmonised VAT system. It required particular care not to extend the category beyond its permitted limits. The zero-rate in question was therefore restrictive or circumscribed, rather than liberal or permissive.

4. The language of Group 3 demonstrated that its items were tangible articles. Item 6 contemplated articles capable of being supplied with covers or cases. Item 4 confined music to printed, duplicated or manuscript music. The later Notes reliably confirmed the original scope because the standstill prevented expansion. Note 1(b) addressed lending services in respect of goods, while Note 2 also proceeded on the basis that Group 3 concerned goods. These features outweighed the general social policy of promoting literacy and informed public debate.

5. Digital editions might have substantially the same content and social purpose as printed editions, and might be edition-based and curated, but they were intangible. They were different in kind and in the complexity they created, including concerning place of supply. Treating them as newspapers would therefore impermissibly expand Item 2.

6. Fiscal neutrality could not extend the scope of a zero-rating provision beyond its expressed limits. It was unnecessary to determine the wider questions whether the print and digital editions were comparable for that principle or whether they were supplied by competing traders.

• Court of Appeal (Civil Division): HMRC’s appeal was allowed. The court held that the digital news services were not zero-rated newspapers and restored the First-tier Tribunal’s result.

• Upper Tribunal (Tax and Chancery Chamber): On 24 December 2019, the Upper Tribunal allowed News UK’s appeal and held that the digital editions were newspapers for VAT purposes.

• First-tier Tribunal (Tax): On 8 March 2018, the tribunal held that the digital news services were not “newspapers” for the zero-rate.