News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs

A statutory zero-rating provision for newspapers did not extend to digital editions during the period before electronic publications were expressly added. VAT exceptions must be construed strictly and consistently with any applicable standstill provision.

Although legislation generally applies to new circumstances, an updating construction cannot enlarge a national VAT derogation beyond the supplies covered at the standstill date. Printed physical form and accessibility without a separate device were defining characteristics of newspapers at that date. Digital editions were services, differed in kind from printed newspapers and fell outside the same genus.

A shared social purpose does not require related products to receive identical tax treatment. Fiscal neutrality cannot extend the scope of a VAT exemption.

News Corp supplied digital editions of The Times, The Sunday Times, The Sun and The Sun on Sunday between 2010 and 2016. Their content was fundamentally the same as, or very similar to, the printed editions. News Corp contended that they were “newspapers” within Item 2 of Group 3 of Schedule 8 to the Value Added Tax Act 1994 and were therefore zero-rated.

The First-tier Tribunal dismissed News Corp’s appeals: [2018] UKFTT 129 (TC). The Upper Tribunal allowed its appeal: [2019] UKUT 404 (TCC). The Court of Appeal restored the First-tier Tribunal’s conclusion: [2021] EWCA Civ 91.

The central issue was whether the domestic principles of purposive and updating interpretation permitted “newspapers” to include digital editions, notwithstanding the strict construction of VAT exceptions and the EU standstill rule preventing enlargement of historic zero rates. Fiscal neutrality was advanced as an alternative argument.

1. Appeal dismissed unanimously. Lord Hamblen and Lord Burrows gave the judgment with which Lord Hodge and Lord Kitchin agreed. Lord Leggatt concurred for separate reasons. Digital editions supplied during the relevant period were not “newspapers” within Item 2 of Group 3 of Schedule 8 to the Value Added Tax Act 1994 and were not zero-rated.

2. The modern approach to statutory interpretation determines the meaning of the enacted words from their context and purpose. Legislation is generally capable of applying to later changes, including technological developments that could not reasonably have been foreseen. That principle is exceptional where the words, context and purpose tie the provision to an historic or frozen meaning.

3. Zero-rating provisions are exceptions to the general VAT regime and must be interpreted strictly, though not so strictly as to deprive them of their intended effect. The applicable EU standstill provision permitted historic national zero rates to be maintained but prevented their scope from being expanded beyond supplies covered on 31 December 1975. These constraints required the updating principle to be applied at the less liberal end of the scale.

4. At the standstill date a newspaper meant news communicated in printed physical form and accessible without a separate electronic device. Digital editions constituted supplies of services, required electronic devices or connectivity and enabled forms of interactive communication unavailable in print. Those differences were of kind, not merely degree. Digital editions therefore fell outside the same genus as the newspapers zero-rated in 1975. Technological changes to the production or physical material of a printed newspaper could remain within that genus.

5. The social purposes of promoting literacy, disseminating knowledge and supporting informed public debate did not determine the boundary of the exception. Tax exemptions reflect granular budgetary and political choices. The fact that two products serve the same social purpose does not require equal tax treatment.

6. Fiscal neutrality could not assist. That principle cannot enlarge the scope of an exemption. No issue arose concerning unequal treatment between different forms already falling within the zero rate.

7. Lord Leggatt agreed that strict construction required the narrower meaning of “newspapers”. He considered that technological change is neutral: ordinary purposive interpretation asks whether a new object falls within unchanged statutory meaning, without any distinct “always speaking” presumption. This difference in analysis did not affect the result.

1. United Kingdom Supreme Court: The court unanimously dismissed News Corp’s appeal and affirmed the Court of Appeal’s conclusion: [2023] UKSC 7.
2. Court of Appeal: The court allowed HMRC’s appeal, holding that Item 2 concerned physical items and did not include digital editions: [2021] EWCA Civ 91.
3. Upper Tribunal: The tribunal allowed News Corp’s appeal. It held that an updating construction included digital newspapers and did not offend the standstill provision: [2019] UKUT 404 (TCC).
4. First-tier Tribunal: The tribunal dismissed News Corp’s appeals against HMRC’s decisions that the digital editions were not zero-rated: [2018] UKFTT 129 (TC).