HMRC left to fill in the blanks on adult colouring books VAT

25 May 2016

Andrew Hubbard

Reports have surfaced that HMRC is looking at the VAT status of colouring books for adults. Books (whether for children or adults) are zero rated for VAT purposes but not everything sold in a bookshop is a book! Stationery items and things like stamp albums may well be standard rated. There is a specific rule which says that children’s picture books and painting books are zero rated (even if they would not otherwise qualify as books) but the legislation is silent about colouring books for adults.

I’m not going to step on the toes of my VAT colleagues by giving a view on what the proper VAT treatment should be. What interests me is how the tax system deals with new developments in the market place. Adult colouring books have only recently started to appear in bookshops (I suspect that they may have been available for specialised therapy purposes in the past) and therefore the problem of their tax status is a new one. I doubt that the drafter of the 1994 VAT Act ever gave any thought to the possibility that such books might ever exist.

We’ve seen this problem of the tax system having to deal with new developments time and time again. Digital supplies is an obvious one, but there are many more examples: Bitcoin and Sharia finance are a couple of areas which spring to mind. The question for HMRC and the Government is the speed at which they should react to these new developments.

Booksellers are right to be concerned about the uncertainty over the status of adult colouring books. After all, if VAT has to be funded out of the price paid by customers the profit margin on the supply may disappear. But if HMRC were to react to every new development in the market place by rushing out new legislation and guidance then there would be a danger of overkill. After all, a lot of products disappear from view very quickly – anybody remember the tamagotchi?

It would be a waste of HMRC’s limited resources to address each and every new development in this way. I think that HMRC has been a little slow of the mark on adult colouring books because they do now seem to be a permanent fixture, but it would be wrong to be too critical – there is a balanced judgement to be made in each case. Now, I wonder whether there is a market for a tax colouring in book? Remember you heard it here first…

If you would like to discuss any of these points further, please contact Andrew Hubbard or your usual RSM contact.