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DCM (Optical Holdings) Ltd v Commissioners for His Majesty’s Revenue and Customs (Scotland) [2023] UKSC 7 – UKSC Blog

On appeal from: [2021] EWCA Civ 91

Under the Value Added Tax Act 1994 (the “VAT Act“), “newspapers” are “zero-rated”, meaning Value Added Tax (“VAT“) is not charged on them. The question in this case is whether, between 30 August 2010 – 4 December 2016 (the “relevant period“), zero-rating extended beyond print newspapers to digital editions of newspapers, such as editions for e-readers, tablets, smartphones and websites.

News Corp UK & Ireland Ltd (“News Corp“) is the publisher of The Times, The Sunday Times, The Sun and The Sun on Sunday. News Corp argues that the digital editions of these publications were subject to zero-rate VAT for the relevant period, as they are “newspapers” for the purposes of the VAT Act. Commissioners for His Majesty’s Revenue and Customs (“”HMRC“) found that News Corp was not entitled to supply these digital editions at zero-rate VAT. News Corp appealed these decisions. The First-tier Tribunal found that digital editions were not “newspapers” for the purposes of the VAT Act, and so rejected News Corp’s claim for recovery of over £35 million. The Upper Tribunal allowed News Corp’s subsequent appeal. HMRC appealed to the Court of Appeal, which allowed its appeal. News Corp now appeals to the Supreme Court.

HELD – Appeal unanimously dismissed.

The issues in this case require the Supreme Court to apply principles of statutory interpretation and European Union law, since the relevant EU law has become “retained law”, and in any event the relevant period in this case expired before the EU law would have ceased to apply.

The modern approach to statutory interpretation requires the courts to ascertain the meaning of the words used in light of their context and purpose. A statute should be interpreted taking into account changes that have occurred since it became law, even if those changes could not have been reasonably foreseen at the time the statute was enacted. This is known as the “always speaking principle”. Exceptionally, the always speaking will not be applied where it is clear in principle, from the words used in the statute in the light of their context and purpose, that the relevant provision is tied to a historic interpretation.

With regard to EU law, it is well established that zero-rating principles must be interpreted strictly, because they constitute exemptions to the general that supplies of goods and services by taxable persons should be subject to VAT. The need for strict interpretation is particularly marked where, as in this case, it does not involve mandated EU exemptions, but rather national law exceptions. The interpretation is also constrained by Article 110 of the Principal VAT Directive 2006/112 (the “standstill provision“), which requires that, so far as this appeal is concerned, categories of zero-rating cannot be expanded or extended beyond those which existed on 31 December 1975.

With these principles in mind, the starting point is the ordinary meaning of the word “newspapers” in its context as at 31 December 1975. At that date, “newspapers” referred only to printed newspapers. Those were the only kind of newspapers which existed at that time and digital editions lasted many years in the future.

As for the purpose of the zero-rating of newspapers, the First-tier Tribunal was founded as a matter of fact that the social policy behind the zero-rating of newspapers was the promotion of literacy, the dissemination of knowledge and democratic accountability. However, while that social purpose might also extend to digital editions, that finding is of limited assistance in determining the correct interpretation of “newspapers” because that same purpose could equally apply to many items that cannot possibly be covered by the word “newspapers”, for example an online rolling news service. From the perspective of EU law, the purpose of the standstill provision was to prevent social hardship likely to follow from the abolition of existing national law exemptions. No social hardship could follow from the exclusion of digital editions from the ambition of the standstill provision as, at the time, nobody had access to them. Moreover, zero-rating for newspapers was seen as a transitional phase with the ultimate goal being harmonization across the EU with no VAT exemptions at all. This purpose, consistently with the strict approach to exemptions and the effect of the standing still provision, indicates that a narrow meaning should be given to the word “newspapers”.

In this case the always speaking principle must be applied having regard to the EU law constraints imposed by the standstill provision, the principle of strict interpretation of VAT exemptions and the harmonization of the purpose of the law on VAT. These constraints significantly limit the always speaking and mean that the principle should not be applied liberally. As at 31 December 1975, the defining characteristics of a newspaper included: that it was news communicated through the medium of print in a physical form; and that the buyer of the newspaper obtained complete access to the news in that paper. There was no requirement of connectivity, so that access did not depend on owning or buying something else, such as a device. Those characteristics reflect a conceptual difference between newspapers, which are goods, and digital editions, which are services. The difference is one of a kind, not merely degree. Given the significant difference, it cannot be said to be irrational to distinguish between the VAT treatment of printed newspapers and digital editions, and the rationality of such a distinction is borne out by the fact that it is drawn in EU VAT law. Having regard to the constraints of EU law, the always speaking principle cannot be applied to interpret “newspapers” as covering digital editions.

For these reasons, the Court concluded that the term “newspapers” in the VAT Act is not to be interpreted as including digital editions.

For the judgment, see:

For the Press Summary, see:

To watch the hearing, see: