VAT developments
Monitoring VAT legislation and changes in the VAT regimes applied to books and content in the UK and EU is one of the PA's priorities.The PA has advised members to adopt a cautious approach to recent speculation that, while the OECD decision in Ottawa in 1998 precluded any extension of reduced VAT rates as applied to printed material to electronic content, and although the requirement for unanimity makes any change in the current EU regime politically unlikely, the UK might unilaterally extend the definition of the national derogation negotiated under the Treaty of Accession (Group 3 Article 8 of the 1994 VAT Act and confirmed under Article 28 of the EU VAT Directive) to include electronic material.
In fact this is an old idea which has been tested and rejected by the courts. Not only would the UK government have difficulty in overriding the legal judgements, but if by doing so, it came to be challenged also in the European Court, it could risk prejudicing the national VAT arrangements allowed under Article 28, which covers a number of other derogations that are politically more sensitive than just the reduced VAT rate on books and printed materials (e.g. children's clothes).
Members can click here for some notes intended to help avoid confusion with this issue:
VAT Developments