Why is VAT charged on eBooks?

If you own a Kindle or other e-reader you may have noticed that VAT is charged on eBooks whereas regular paper books seem to be exempt from this. It’s now increasingly noticeable since the Chancellor; George Osborne increased the rate of VAT from 17.5% to 20% on the 4th of January, 2011.

At present, the items that are ‘zero-rated’, that is, exempt from VAT, are essential items such as groceries or fuel supplies whereas items that are seen as ‘luxuries’ are taxed the full amount.

Books have long been zero-rated but it seems the problem with the taxation of eBooks lies in HM Revenue & Customs’ definition of a book, which is this:

These normally consist of text or illustrations, bound in a cover stiffer than their pages. They may be printed in any language or characters (including Braille or shorthand), photocopied, typed or hand-written, so long as they are found in book or booklet form.

It seems that HMRC’s definition of a book is rather outdated, failing to take into account the technological advances that make eBooks a viable alternative to a paper book. However they then go on to say the following:

Supplies of any of the following are zero-rated:

 literary works

 reference books

 directories and catalogues

 antique books

 collections of letters or documents permanently bound in covers

 loose-leaf books, manuals or instructions, whether complete with their binder or not, and

 amendments to zero-rated loose-leaf books, even if issued separately.

Now most of the items listed above can be read in electronic format, particularly ‘literary works’ and ‘reference books’ and I can think of no reason that a book should become a ‘luxury’ when displayed on an e-reader. I certainly agree that the e-reader itself should be charged the full amount of VAT but the book itself is the same regardless of whether it’s printed on paper or viewed on a screen.

In fact, the more environmentally minded among you might argue that an eBook is ‘greener’ than its paper counterpart and that the government should be giving tax incentives for an environmentally friendly lifestyle.

If this is to change, the government needs to be told just how important this is to eBook purchasers. Write to your MP or HMRC, or both! And let them know just how unfair and inconsistent taxing eBooks is.

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