News Corp sought zero-rating for digital editions of its newspapers for periods between 2010 and 2016. Its printed editions qualified. The issue was whether readers buying access to editions on electronic devices were receiving “newspapers” within the legislation then in force.
The supplies and the question
The digital titles included The Times, The Sunday Times, The Sun and The Sun on Sunday. News Corp relied on the similarity of their editorial content and purpose to the printed versions. The case concerned the historical treatment of those supplies, before the legislation was changed in May 2020.
Item 2 of Group 3 of Schedule 8 to the Value Added Tax Act 1994 zero-rates “Newspapers, journals and periodicals”. The question was whether that zero-rating covered the digital editions in the specified period. The parties agreed that the answer would also govern the period up to 1 May 2020. From that date the position was put beyond doubt by an order extending zero-rating to newspapers supplied electronically, subject to stated exceptions.
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The EU standstill and the need for strict construction
Newspapers had been free of purchase tax. When VAT was introduced, the United Kingdom preserved that treatment under the transitional permission in the Second Council Directive, enacting it in the Finance Act 1972. The Sixth VAT Directive, and later article 110 of the Principal VAT Directive, operated as a standstill: member states could maintain existing zero rates that satisfied the conditions of clearly defined social reasons and benefit to the final consumer, but could not create new ones. It was common ground that a category not zero-rated on 31 December 1975 could not later become zero-rated, so that date remained decisive for the United Kingdom.
Zero-rating is an exemption from the general rule that supplies are taxed at the standard rate, and national exceptions tolerated by EU law must be interpreted particularly strictly and not extended. In Talacre Beach the Court of Justice treated the standstill as restricting the permitted scope to what the national legislation expressly covered on the relevant date. Its purpose was to avoid social hardship from abolishing existing exemptions, pending the progressive removal of derogations.
The decisions below
The First-tier Tribunal rejected News Corp’s claim. The Upper Tribunal allowed its appeal, treating the provision as capable of embracing digital editions. The Court of Appeal restored the First-tier Tribunal’s result.
The majority reasoning
Lords Hamblen and Burrows, with whom Lord Hodge and Lord Kitchin agreed, dismissed the appeal. The ordinary meaning of “newspapers” on 31 December 1975 was printed newspapers; digital editions did not exist. News Corp therefore had to rely on the always speaking principle: a statute is generally interpreted in the light of later changes, including technological change that could not have been foreseen, so that it does not become outdated, unless its words, context and purpose tie it to a historic meaning. The new facts must fall within the same genus; a difference in kind or dimension will not do.
The majority accepted that statutes can apply to developments unforeseen when they were enacted. Here that principle operated within the EU standstill on extending the scope of zero-rating. Digital access was a service delivered using a separate electronic device, whereas a printed newspaper was itself the physical means of reading the news. The majority regarded the difference as substantial in the context of the historical exemption.
A shared purpose of disseminating news did not settle the issue. It could not show how far Parliament intended an exception to the standard rate to extend. The question was the meaning of the specified item, read in its fiscal and legislative context.
Fiscal neutrality, which requires similar supplies to receive the same VAT treatment, cannot enlarge an exemption. It would have mattered only if the court had zero-rated some digital forms and not others. It did not, so the principle required no further decision.
Lord Leggatt’s concurrence
Lord Leggatt agreed in the result but not in every step concerning the always speaking approach. He treated the metaphor as covering distinct problems. Changes in the ordinary meaning of words do not justify an updated construction. Contemporary values and scientific understanding are generally applied to evaluative or scientifically loaded language. Technological novelty is neutral: there is no presumption either way, and the question is simply whether the new thing falls within the statutory words read in the light of the provision’s purpose. That digital editions were unforeseen therefore proved nothing either for or against inclusion.
Lord Leggatt accepted that ordinary language can use “newspaper” for a title available electronically. For him the decisive consideration was the EU restriction on enlarging the existing zero rate. That context required the narrower construction for the period at issue.
Verdict: The Supreme Court unanimously dismissed the appeal. The digital editions did not qualify for the zero rate during the period claimed. Lord Leggatt agreed in the result but gave separate reasons on statutory interpretation.
Source: News Corp UK & Ireland Ltd v Commissioners for His Majesty’s Revenue and Customs [2023] UKSC 7
