The UK publishing industry is nervously awaiting HMRC’s review of the VAT treatment that should be applied to the burgeoning adult colouring books sector.
Currently these are generally treated as being subject to the zero rate of VAT but that notion is being challenged by HMRC, who are suggesting the standard rate should instead apply.
Children’s colouring books are zero rated (and we understand that there is no intention from HMRC to alter this position) but the supply of adult versions is covered by a different part of the VAT legislation.
Until now, there had been little reason for the existing zero rated VAT treatment to be contested by HMRC but the past year has seen sales explode to exceed £20m in annual receipts. Consequently, HMRC are now considering if the adult colouring books should be (and possibly have always been) characterised as stationary alongside other items which are sold with a view to being completed such as diaries, address books and stamp albums. If this was to be the case, the standard rate would apply and publishers may be forced to account for VAT on both past and future sales if the zero rate had been applied.
A decision from HMRC on the matter should be forthcoming in the second half of this year.