The Challenges of VAT

Oct 15, 2019 | Taxation, Tax Tuesday

colouring pencil

We are very conscious that you received a double dose of you-know-what last week, with our tax-filled monthly newsletter arriving on top of Tax Tuesday.

So, today, here is some light relief (still from the fiscal world), an item which you might find entertaining and which illustrates The Challenges of Value Added Tax. This concerns adult colouring books.

When you buy an adult colouring book from the Amazon website or from the shelves of W H Smith this Christmas, you might be interested to know the following………..………..

Books are, as we may all be aware, free from VAT (well, they’re zero-rated, to be more accurate). But “books” are items which, according to the law, are to be “read or looked at”. Colouring books aren’t for looking at, according to HMRC, they are for “completing”. (We think they probably are for “looking at”, especially after “completion”, but we have better things to do than fight about this particular interpretation, and maybe the “looking” does come too late.)

Is it inevitable, then, that VAT, at the standard rate of 20%, must be charged by the businesses who supply colouring books? Well no, it’s not inevitable. There is another relevant zero-rating provision in the VAT code. This relates to “children’s picture and painting books”. Colouring books for kids fall within this zero-rating without a doubt. Thank goodness.

But what about adult colouring books? Well, it’s a real issue. There are lots of us colouring in, in our spare time (which isn’t a confession, by the way – we at Harold Sharp are generally too busy helping to solve our clients’ financial challenges to dare to start an A3 canvas of Aslan at The Last Battle). Yes, accountants-aside, it’s become a very popular pastime for those of us over 18. Millions of units of every conceivable uncoloured scene and landscape find their way into the Christmas stockings of eager Mums and Dads across the land, every year. The question for retailers (and the buyers who have to pay) is, does the price include 0% or 20% VAT?

Well here is the answer: In a compromise solution to the question, HMRC have stipulated that only those colouring books which are clearly suitable for, and marketed towards, adults (for which, read those that include profanity, nudity and violence – all the adult staples!) must carry VAT at the standard rate of 20%. Meanwhile those items which are arguably capable of falling within the “children’s picture and painting book” definition are to remain at 0%; these might well include books which are relatively complicated for juniors or which depict subjects potentially less likely to interest them. In practice you might not be buying “St Paul’s In The Moonlight” for your 7 year old nephew (with apologies to those who might, quite fairly, be thinking “why ever not?” right now), but more than likely the price will have no VAT content, nevertheless.

So, after all of that, here is your post-seminar quiz question:

The bestseller “Sh*t Happens! Swear Words and Mantras to Colour Your Stress Away”, by James Alexander, has a recommended retail price of £8.99 (you will get it cheaper). How much VAT do you think is included in that? Is it:

  1. £0.00
  2. £1.50
  3. £1.80
  4. £8.99
  5. I really don’t care Harold.

A winner will be selected, at random, from all correct entries received this week and will receive a copy of James Alexander’s essential stocking-filler, courtesy of Tax Tuesday.