VAT Relief (Talking Newspaper Associations)

Iain Stewart Excerpts

Monday 14th July 2014 Commons Chamber

[Iain Stewart (Milton Keynes South) (Con)]

I am grateful for the opportunity to raise the subject of VAT relief for talking newspapers. For the convenience of Members who may not be familiar with the concept of a talking newspaper, let me begin by explaining what they are and the important service that they provide to people who are blind or partially sighted, or who have some other disability that makes reading a newspaper difficult. There are 500 talking newspapers in the UK and Isle of Man. By and large they are small charities where a group of volunteers will read the contents of a local newspaper on to a cassette, CD or digital recording device. Those are then posted to registered listeners who listen to the recording and return the cassette or CD to the talking newspaper association in time for it to prepare the next edition, usually on a weekly basis.

It is important to emphasise the small, local and charitable nature of these associations. On average, each talking newspaper has 130 listeners and 34 volunteers, and they should not be confused with larger, national organisations that provide an excellent service of national newspapers, magazines and books for people who are registered blind or partially sighted. Their services are provided free of charge and they rely on small-scale local fundraising and grants to provide an income to cover the recording and distribution equipment and running costs.

I should also declare a family interest in this subject. More than 30 years ago, my father—Jim Stewart—and a small group of helpers set up the Hamilton Sound talking newspaper in the town in Scotland in which I grew up. He is still chairman of that today, and more than three decades later over 1,000 editions of the talking newspaper have been produced. I know that its listeners—a couple of hundred or so on average—have greatly valued the service. While national news can easily be accessed by a number of means, it is not always easy for people who are blind or partially sighted to obtain the local news that a local newspaper can provide.

I salute the work that volunteers up and down the country do in their communities to help often vulnerable people keep in contact with the outside world, and in this debate I wish to seek clarification and an update of the VAT rules that affect talking newspapers. For some time, talking newspapers have rightly been able to benefit from some financial assistance in providing their service—for example, they do not have to pay postal charges for the issuing or return of their products. In the 1986 Budget the then Chancellor, Lord Lawson, announced a number of VAT reliefs for charities. That included relieving charities from VAT on

“all recording equipment for talking books and newspapers used by charities for the blind”—[Official Report, 18 March 1986; Vol. 112, c. 178.]

After the 1992 Budget, the then Chancellor, Lord Lamont, extended the relief available to include

“repairs and maintenance of equipment used for talking books.”

The most recent guidance from Her Majesty’s Revenue and Customs—notice 701/1 from May this year—states:

“Charities and voluntary bodies caring for the blind and the severely visually impaired can obtain zero-rating for purchases of sound recording and reproduction equipment (or parts and accessories for such equipment) that has been designed or specially adapted for recording or reproducing speech for the benefit of such persons. In the case of reproduction equipment, zero-rating will not apply where the equipment is available for use by anyone other than the blind or severely visually impaired. The zero-rating also covers radios and cassette recorders purchased by charities for free loan to the blind, and the repair or maintenance of any equipment mentioned in this paragraph.”

There is, however, considerable confusion in the talking newspaper community about what is and what is not eligible for VAT relief. Part of that stems from the fact that the technology used by talking newspapers has changed considerably since the original VAT exemption in the 1980s and 1990s. At that time, an original tape recording of the edition was made and copied on to audio cassettes by a high-speed copier. Now, although a minority of talking newspapers still use that traditional method, approximately 80% produce digital recordings.

The confusion stems from the part of the guidance which states that

“zero-rating will not apply where the equipment is available for use by anyone other than the blind or severely visually impaired”.

The onus is on the manufacturer or supplier to come to an agreement with HMRC that the product is designed specifically for blind and partially sighted people. When purchasing sound equipment from a company, the talking newspaper must supply the company with a declaration for the benefit of Customs and Excise, stating that the equipment is exempt from VAT. The problem is that talking newspapers now use equipment such as computers, digital copiers, memory sticks and memory stick players that can be used by the general public and other businesses, and therefore attract VAT. Talking newspaper associations are finding that many companies are not willing to risk applying for a VAT exemption on those products. I received a number of comments from talking newspapers ahead of this debate, and a remark by Bob Finch of Colchester talking newspaper neatly summarises the point:

“Most suppliers just charge the VAT to cover their own backs. I am aware that Kings Audio and Laplock Technology are both selling their versions of memory stick players VAT free, having apparently convinced HMRC that these particular items are only ever going to be used by visually impaired people. I applaud them for doing that, but any other items they or other suppliers sell are charged because they could be used by non-disabled people.”

It is clear that many talking newspaper associations in the country are having to meet a VAT cost that they should not have to meet, given the spirit of the 1986 and 1992 measures, and it is a significant extra cost for what are often very small charities. Brian Sharp of the Forth Valley talking newspaper association told me:

“We have recently transferred all our listeners on to USB memory sticks from both cassette tapes and CDs. The total cost of the project was £11,542 which included £1,247 in VAT”.

Roughly £1,250 is small change for the Treasury but a hugely significant cost for the charity.

There is certainly an appetite in the talking newspaper community for a clarification of current VAT rules, and an updating of them to ensure that the spirit of the original provisions is reflected in new technology that talking newspapers increasingly use. I heard from Janelle Scotland, chair of the Association of Scottish Talking Newspapers, that advice on the matter from local HMRC offices around the country seems to vary, which adds to the confusion. Such a move would be supported by the Royal National Institute of Blind People, which stated:

“Advances in technology mean that most talking newspaper associations are no longer using the kinds of equipment that have historically been VAT exempt; the RNIB urges HM Treasury to extend VAT relief to cover the digital equipment now used to produce talking newspapers.”

I accept that there will always be a risk that VAT-free digital equipment could be misused, but we are talking about a comparatively small number of listeners in the country and a small number of associations. Would it not be acceptable for them to complete a VAT exemption per purchase of equipment outlining the proposed use? Under current postal arrangements the Royal Mail trusts talking newspaper associations to send mail free under the articles for the blind scheme only to blind or partially sighted people, but it reserves the right to carry out spot-checks to ensure that an association is adhering to the regulations. Could HMRC do something similar?

Another possible solution would be to allow talking newspapers to claim back VAT retrospectively. A potential problem is that many talking newspapers will not be VAT registered as their turnover falls way below the threshold, but surely some special arrangements could be made. Perhaps it could be done collectively through the national talking newspaper bodies in Scotland, England and other parts of the United Kingdom, rather than via each individual association.

At the very least, may I ask my hon. Friend to facilitate a meeting between herself, HMRC and representatives of talking newspapers associations to clarify both the current law and what items of equipment are and are not exempt? It is a muddle at the moment and most talking newspapers are small charities whose volunteers are not necessarily well-versed in the intricacies of fiscal policy. I received another good comment from Rob Pearman, from St Albans & District talking newspaper. He wrote:

“It is a problem when some of us are scared of HMRC and we do not actually feel secure on all aspects of the laws and regulations with which we have to struggle. As a child I went to a school where the school rules were headed ‘Ignorance of these rules shall not be taken as an excuse - it haunts me to this day!’”

If a change in the law is required to update the current regulations, I would like the Minister to take this as an early submission for the autumn statement and next year’s Budget. I very much doubt it would incur a significant cost to the Exchequer to bring the regulations up to speed in the original spirit. I am grateful to have had this opportunity to raise an issue that is of considerable concern to these wonderful charities that provide a valuable and much cherished service to some of the most vulnerable members of our communities.