HMRC’s Decision regarding Photo Books
The First Tier Tribunal has ruled in favour of the tax payer in the Harrier LLC case. As a result HMRC has issued Revenue & Customs brief 04/12 accepting that Photo books are books and should therefore be a zero rated supply. HMRC has decided not to appeal the decision.
Harrier provided customers with a photo book that comprised a number of photographs taken by the customer. Typically, the customer uploads his or her photographs and other images of text, drawings, handwritten text and so on to a third party website. The customer chooses the particular photo book template they desire and can arrange the layout of individual pages.
Once the customer has completed their action they can then place their order. The order is electronically transmitted to Harrier who then produces the photo book using printing presses.
Harrier claimed that the photo books were zero-rated for VAT purposes as they fell within the definition of book under the law.
HMRC’s contention is that what Harrier supplies is a service and not goods. They further argued that the photo books are only ancillary to that service and the entire supply should therefore be standard rated.
The Tribunal decided that the majority of the items in question were books and dismissed HMRC’s argument that the photo books were ancillary to a supply of services.
In making its decision the Tribunal took support from the High Court case of Colour Offset Ltd , where it was found that a book has the minimum characteristics of having a significant number of leaves, usually of paper, held together by front and back covers usually more substantial than the leaves. The book must also be designed to be read or looked at.
Two items were found not to be books because they consisted of spiral binding and the pages had the quality and appearance of individual photographic prints.
HMRC’s Policy Going Forward
Subject to certain exceptions, HMRC accepts that a photo book which possesses, as a minimum, several pages, a cover stiffer than its pages and is bound, will qualify for zero-rating as a book. The book must also be designed to be read or looked at.
The Effect of the Decision
If you consider that the supplies that you make are similar to those of Harrier and the ‘books’ that you supply have the characteristics described above then your supply is likely to be of a book and therefore zero-rated.
If they do not then it is likely that they will be taxable at the standard rate.
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