Revenue and Customs v News Corp UK & Ireland Ltd

Factual and Procedural Background

The appeal concerns whether the term "newspapers" in Item 2, Group 3 of Schedule 8 to the Value Added Tax Act 1994 ("the VAT Act") includes digital news services supplied by Company A during the period from September 2010 to December 2016. The First-tier Tribunal (Tax) ("the FTT") initially held that digital news services are not "newspapers" for VAT purposes. This decision was reversed by the Upper Tribunal (Tax and Chancery Chamber) ("the UT"), which found that the digital news services are "newspapers" liable to zero-rate VAT. The Commissioners for Her Majesty's Revenue and Customs ("HMRC") appealed against the UT's decision, challenging the application of the "always speaking" principle of statutory interpretation and the relevant EU law principles governing zero-rating. Company A contended that digital news services share the necessary characteristics of newspapers and that the UT's interpretation was correct. The appeal focuses on the interpretation of "newspapers" for VAT zero-rating purposes and the application of EU law principles, including fiscal neutrality and strict construction of zero-rating provisions.

Legal Issues Presented

1. Whether the UT erred in law in applying the "always speaking" principle of statutory construction to interpret "newspapers" in Item 2 of Group 3 of Schedule 8 as including digital news services.
2. Whether the UT misapplied relevant EU law principles, including the requirement for strict interpretation of zero-rating provisions and the standstill nature of Article 110 of the Principal VAT Directive.
3. Whether the principle of fiscal neutrality applies to require the zero-rating of digital news services similarly to printed newspapers.

Arguments of the Parties

HMRC's Arguments

• The term "newspapers" as zero-rated in 1972 was limited to printed newspapers; digital news services were not contemplated and cannot be included, as zero-rating categories cannot be expanded.
• The UT misapplied the "always speaking" principle by failing to apply a strict interpretation and ignoring the EU and domestic legal context, including the standstill provision in Article 110.
• The items in Group 3 are limited to tangible goods and do not include services; digital news services are not within the same genus of facts as printed newspapers.
• The zero-rating provision must be interpreted in accordance with EU law, which excludes electronically supplied services from reduced or zero rates during the relevant period.
• The UT wrongly disregarded relevant EU provisions distinguishing printed publications from electronic supplies.

Company A's Arguments

• The "always speaking" principle applies, allowing the term "newspapers" to include digital news services as modern forms of newspapers consistent with the original legislative purpose.
• There is no express limitation in the statutory language restricting Group 3 to physical goods; the UT correctly found no intention to exclude digital services.
• The digital news services share the essential characteristics of newspapers, including being edition-based and curated, fulfilling the same social policy aims.
• The principle of fiscal neutrality requires similar VAT treatment for goods and services that are objectively similar from the consumer's perspective.
• The standstill provision in Article 110 preserves domestic zero-rating, which can include digital newspapers if they fall within the original categories, and the EU legislative materials cited by HMRC are not relevant to this domestic exception.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed statutory construction exercise to determine whether "newspapers" in Item 2 of Group 3 Schedule 8 includes digital news services. It acknowledged the "always speaking" principle, which allows statutory terms to evolve in meaning over time to include new but analogous developments. However, this principle must be applied in the context of zero-rating provisions, which derogate from the general VAT principle and must be interpreted strictly.

The court considered the legislative history, the statutory language, and the EU law context, including Article 110 of the Principal VAT Directive, which acts as a standstill clause preserving zero-rating categories as they existed at 1991. It found that the items in Group 3 were clearly intended to cover tangible or physical goods only, as evidenced by the language of the items and Notes, including references to covers and cases and explicit limitations in related categories such as printed music.

The court rejected the UT's conclusion that the absence of an express exclusion of services meant digital news services should be included. It held that the UT failed to apply the strict interpretation required and impermissibly elevated the "always speaking" principle above the strict construction mandate. The court also found that the UT impermissibly engaged in hypothetical legislative intention by speculating on Parliament's intent regarding digital newspapers not contemplated in 1972.

Regarding fiscal neutrality, the court recognized the principle but concluded it does not permit extending zero-rating beyond the clearly defined statutory categories. The digital news services are not within the same genus as tangible newspapers and thus fall outside the zero-rating provision.

In sum, the court balanced the competing interpretive principles, the legislative context, and EU law requirements, concluding that the statutory term "newspapers" in the zero-rating provision does not encompass digital news services supplied by Company A during the relevant periods.

Holding and Implications

The appeal is allowed. The court held that the term "newspapers" in Item 2 of Group 3 of Schedule 8 to the VAT Act must be interpreted as covering only tangible or physical newspapers and does not extend to digital news services. Consequently, the digital news services supplied by Company A during the relevant periods were not entitled to zero-rating for VAT purposes.

The decision restores the FTT's original conclusion and overturns the UT's contrary ruling. The ruling clarifies the limits of the "always speaking" principle in the context of zero-rating VAT provisions and affirms the requirement for strict interpretation of VAT exemptions under EU law, particularly in light of the standstill provision in Article 110 of the Principal VAT Directive.

No new precedent was set beyond confirming established principles of statutory interpretation and EU VAT law. The direct effect is that digital news services supplied in the relevant periods are subject to standard VAT treatment, not zero-rating.