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Colour me VAT

HMRC sets out the VAT treatment for colouring and dot-to-dot books – is it simply child’s play?

May 2017

HMRC has issued a VAT brief on the scope of the zero rate for colouring and dot-to-dot books, effective from 1 April 2017.
It explained that the past two years or so has seen a growth of books labelled or described as ‘adult colouring books’ and ‘adult dot-to-dot books’. Many suppliers have zero-rated these books in the belief they are a general book (like a paperback or hardback novel), placing reliance on Item 1 of Group 3 to Schedule 8 of the Vat Act 1994 – as you do!
However, the leading case on what is a book is set out in ‘Customs and Excise Commissioners v Colour Offset Lid [1995]’. In this case, the High Court found that a book is produced on paper or cards, consists of a number of leaves and is bound in a stiffer cover. In addition, perhaps more importantly, the book must be designed to be “read or looked at”.
The briefing states that while the adult colouring and dot-to-dot books satisfy most of the conditions they are not designed to be read or looked at. In fact, they are designed to be ‘completed’. Therefore, while these books are not zero-rated under Item 1 of Group 3, they could be zero-rated under Item 3 of Group 3 as ‘children’s picture and painting books’ if changes are made.
HMRC is clarifying its policy concerning the VAT treatment of these types of books, particularly those sold after 1 April 2017.
Coluring books that are suitable and held out for sale to children under the age of 18 years are zero-rated. Most of the content of the books currently sold as ‘adult colouring books’, or as books ‘suitable for grown ups’, are also suitable for children under the age of 18 years. However, the way they are marketed and held out for sale, in HMRC’s view, prevents them from being eligible for the zero rate.
HMRC said it accepts that colouring books and dot-to-dot are VAT zero-rated unless one of the following applies. The books are:
• Marked as suitable for adults or grown-ups.
• Held out for sale in retail shops together with other adult books that are unsuitable for children or are not appropriately marked as suitable for children when for sale on a website.
• Contain images reflecting profanity, pornography, violence and illegal acts.
If the book meets any of these three conditions then the standard rate applies.
HMRC has said that it does not intend to seek recovery of any tax on colouring or dot-to-dot books sold prior to 1 April 2017 where the content is suitable for children. This is irrespective of how the book was marketed or held out for sale at the time.
However, books that contain images reflecting profanity, pornography, violence and illegal acts (as determined in VAT Notice 701/10: zero-rating of books and other forms of printed matter) will not be treated as zero-rated. The content of such books, explains the brief, can never be seen as suitable for children.

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