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The title of this piece is an adaptation of a very silly joke which still makes me chortle – “What’s the difference between a duck?”.

Its silly nonsense and it has sprung to mind because of similar silly nonsense currently being played out in the CJEU in relation to “proper” books, that is printed material and e-books.

For those of you not in the know, in the UK printed books (and other printed material such as magazines and journals) are zero-rated for the purposes of VAT – its a “social exemption” geared towards encouraging reading and learning and so the betterment of society (mind, our current positioning in international league tables for literacy may call the success of the exemption into question).

However, e-books are not. They are standard rated for the purposes of VAT. Which means that when you buy your Kindle (or equivalent device) and you pay for electronic “books” to download and read on it, you pay 20% VAT in this country.

The same applies to e-versions of any reading material which is also printed – e-zines, e-newspapers etc etc.

This is because, in the main, the delivery of electronic “goods” (that is anything that is downloaded as opposed to handed over in a physical way) is a supply of services rather than a supply of goods. And because there is various EU legislation and agreements which specifically exclude the delivery of electronic services from the zero-rate.

A “standard” rate is applied to e-books (and other e-reading material) in most other EU countries – with the exception of Luxembourg and France where the rate for e-books (and I assume e-versions of other printed material, but I haven’t checked that) is a “reduced rate” of 5.5%.

This why the likes of Amazon, perfectly properly in my opinion, establish themselves in countries such as Luxembourg for the purposes delivering their e-books etc.

The countries within Europe who “play by the rules”, as it were, and who are losing revenue because of canny tax planning by the likes of Amazon, have been moaning about this for years to the Commission – the UK included. Well, the Commission has finally taken notice and brought infraction proceedings against France and Luxembourg and at some point in the next, oh 2 or 3 years, the CJEU will make a decision on the correctness of their tax treatment of e-material.

This has particularly caught my eye because back in the day when I provided my services to HMRC (C&E as it then was) I dealt with this very issue on behalf of the Commissioners in a whole raft of cases but specifically in relation to the supply of educational material by email and on CD-Rom.

The ruling was, and had to be at that time, in my opinion, that such supplies were standard rated. If the material was printed and sent hard copy, an entirely different matter – it would attract the zero-rate.

I thought the difference in treatment between different formats of the same material was wrong then and I still do. Taxing any form of “book” at the standard rate is just plain wrong – the exemption on printed material is there because it is deemed, correctly in my opinion, that access to the written word is “a good thing”. Further that writing – whether it be about the weather or quantum physics (or some of the very dodgy stuff in between) – and publishing it is a also “a good thing”.

Not only does it educate us generally (please see previous comment about literacy league tables!) it facilitates our much revered freedom of speech, it aids the democratic process, it keeps parliament and the politicians in check, it adds to our cultural growth.

Taxation of “books”, at any rate, creates a potential bar to access. It discriminates. It is  A BAD THING.

You might say, well it doesn’t matter because the e-book providers like Amazon are based in countries applying a reduced rate to such material. Wrong.

With effect from 1 january 2015 the “place of supply rules” for such material changes – rather than VAT being imposed at the rate in force in the country where the supplier is based, it will be imposed at the rate where the recipient is based. So for UK customers, e-books supplied from Luxembourg will be subject to 20%.

Stock up now while stocks last.

Karen Robb, VAT Partner at Grant-Thornton has written a very good article about this and you can access it here 

HMRC guidance on the “VAT-ability” of books is here

So, what is the difference between a duck?

One of its legs is both the same.