The VAT man joins the dots but not in time for Christmas

The recent growth in adult colouring-in and ‘dot-to-dot’ books has potentially led to another VAT anomaly akin to the famous debate as to the VAT liability of Jaffa Cakes depending on whether it’s classed as a cake or a biscuit.

This time, the anomaly is the correct VAT liability to be attributed to colouring books. Technically an adult colouring-in book should have been subject to VAT at the standard-rate and not VAT at the zero-rate applicable to children’s books; but many retailers have not been imposing the VAT charges. However, HMRC has recently announced that if changes are made to marketing, so that such books are suitable for and targeted at children under the age of 18 then they should be VAT-free.  This is good news for adults who enjoying such a pastime, but the changes won’t apply until after Christmas – which some may think is a “bah humbug” approach to take. 

HMRC has stipulated, that while the colouring and dot-to-dot books do not need to specifically state they are for sale to children to be treated as VAT-free, there is qualifying criteria to be met by high street retailers and online sellers, such as the books must not state that they are suitable or specifically aimed at adults or grown-ups; should not be held out for sale in retail shops or websites together with other adult books that are unsuitable for children; and must not contain images reflecting profanity, pornography, violence or illegal acts.

Jim Burberry, VAT Partner at RSM said,

‘This clarification from HMRC will be welcome news to publishers, retailers and websites selling such books and removes the potential for VAT being overcharged to customers on such products; and thus potentially making the price more attractive. These changes will take effect from 1 April 2017, which is good news but not soon enough for Christmas and any stocking fillers – so technically adult colouring-in books will remain subject to VAT until that point.’