VAT on Ebooks Abolished from 1st May 2020
Chancellor of the Exchequer Rishi Sunak announced on April 30 2020 that e-publications would be VAT-free starting on 1st May 2020.
The government implemented this following its efforts to encourage more people to read while they rightly stay home during the covid pandemic.
Originally intended to be enforced on December 1, 2020, it also aims to boost the information dissemination across the whole UK amidst a national crisis.
In his statement, Sunak said "We want to make it as easy as possible for people across the UK to get hold of the books they want while they are staying at home and saving lives. That is why we have fast-tracked plans to scrap VAT on all e-publications, which will make it cheaper for publishers to sell their books, magazines and newspapers."
Scope of VAT on ebooks
As VAT accounts for 20% of a product's price, e-books, e-magazines, e-newspapers, and e-journals are now significantly more affordable, with e-books possibly getting cheaper by £2 and annual subscriptions by up to £25. More readers now can purchase, and more publishers to have a boost in their sales.
The VAT scrap does not include audiobooks, however. The Royal National Institute of Blind People expressed their disappointment on the exclusion of audiobooks. Head of social change for the RNIB Sarah Lambert said "Today's change recognises the unfairness of taxing some alternative formats and will help widen access for blind and partially sighted people who use e-Readers. However, for many people living with sight loss, audiobooks are their preferred format and allow them to enjoy their favourite titles in the same way as everyone else. It's not right that they will continue to be charged 20% more for books and we urge the government to make sure that audiobooks are included in the exemption."
In what publishing organisations and companies consider as a long-overdue action, the government's decision to apply a zero VAT rate aims to achieve the following goals:
Information dissemination. Now more than ever, people have access to news, analyses and other vital bits of information relevant to the global COVID-19 crisis, to the national economy, and their local area's current statistics on the pandemic. As the VAT scrap makes trusted journalism more affordable, more publishers can sustain this vital role of supplying quality news to more people
Education. Families now have better access to learning materials such as storybooks, as they adjust to schools and libraries closing. The National Literacy Trust reported that one in every four children on free school meals and one in every six children ineligible for free school meals read e-book versions of fiction. Removing the VAT removes the barrier between child and books, and hopefully promotes love for reading in children that would continue even after the Coronavirus crisis.
Leisure. The government continues to advocate for the protection of the NHS, and this includes everybody doing their part in flattening the curve mainly by staying at home. As more people become aware of e-books now becoming as affordable, if not more affordable, than their physical counterparts, leisurely reading will become more popular. Not only does this provide comfort and entertainment to people who are otherwise anxious about the whole COVID-19 situation, but it also popularises authors, the love of reading, and the entire publications industry again.
The government has also allocated an additional £35 million worth of advertising for print media, intending to collaborate with local, regional and national outlets in sending out critical government announcements on Coronavirus.
While physical publications such as books and newspapers have been VAT-free ever since it was first introduced in 1973, this move recognises more the enormous role of print media, especially in reaching isolated communities, such as older people and BAME. This partnership expects to widen information reach of up to 34 million people each day.
The government's fast-tracked decision of enforcing the zero-rating of VAT on e-publications will have only positive effects on all involved.
Even before the VAT scrap, e-publications are already reporting a significant increase in sales.
TI media reported a 200% surge in subscriptions, while Hearst recorded more than 100%, both before the implementation of the VAT scrap. The figures are even more astounding in libraries. E-memberships have increased by a staggering 600%, and e-Lending has recorded a 300% increase.
The VAT scrap will achieve a two-pronged goal: to support publishers, authors and journalists as they take on the vital role of providing the material that enriches the minds of people at this challenging time, and to promote reading on a national level. Businesses in the industry should immediately update their websites and sales platform to reflect zero VAT.