In a ruling with far-reaching implications, a tax tribunal has sided with the publisher of The Timesby saying that because its site is only updated four times per day, it does not count as a digital news service and remains the equivalent, in tax terms, of a newspaper that is delivered over a digital channel.
The importance? If you are considered a newspaper rather than an online digital news service, you do not need to charge your customers VAT.
If you're a digital news service, you need to put an additional 20% tax on top of subscriptions.
The Guardian believes the favourable tribunal decision could save The Times around GBP15m a year. So that is massive news for the newspaper which can now, in theory, ask for a refund of VAT payments on income earned from subscriptions. The Guardian article suggests that The Times could go as far as calling back VAT payments dating all the way back to 2010 when the paper went online behind a firewall, charging for access to its content.
How much the rebate could be worth is anyone's guess. It will depend on how many subscribers the paper had in each year, but it could possibly be worth tens of millions of pounds.
I guess the question most readers, including myself, will have is whether any potential windfall is shared with those of us who paid VAT on our subscriptions over the years or whether the paper will pocket the rebate. It will be interesting to see whether the paper reduces the monthly bill for subscription to the before VAT price, or round it up to the nearest pound or just keep it the same.
While this is all welcome news for The Times, which is also cost-cutting by sharing editorial resources for the first time with sister title The Sunday Times, it raises a very serious question for digital news.
Is having rolling news worth the 20% VAT charge? At the moment, until this decision, this wasn't an issue. If news is delivered online any subscription must have VAT added.
But now there is a caveat. If publishers only update the news site fewer than four times per day, they could, in theory at least, follow The Times and be considered VAT-free.
That would allow news sites to slash subscription charges -- but it would also, in theory, allow all magazines to be sold online without VAT.
It would need a magazine to make the move but if a newspaper can be treated as if it is still printed -- in tax terms -- if it is not regularly updated, then surely a weekly or monthly magazine qualifies?
Nothing is set in stone because the tax office could appeal the decision, or it could be challenged by another publisher seeking a similar ruling and getting a different result.
However, I can't help but feel excited for news service -- and particularly magazines -- here. It always seemed unfair to charge VAT on digital services but not print. They are essentially the same content businesses, regardless of channel, so it would seem only fair that VAT rules were consistent.
If this is all upheld, it could means a massive wave of VAT reimbursements for publishers and the ability to offer more competitive subscription rates.
Usually the tax office is only discussed in terms of dread in January, as the tax deadline at the end of the month looms large, but this is a welcome change.