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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Harrier LLC v Revenue & Customs [2011] UKFTT 725 (TC) (10 November 2011) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01562.html Cite as: [2012] STI 80, [2012] SFTD 348, [2011] UKFTT 725 (TC) |
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[2011] UKFTT 725 (TC)
TC01562
Appeal number: TC/2010/5337
VAT – lead case - photobook supplies by appellant to website operators and retailers – whether supplies of goods or services – whether supplies of goods were of “books” or “booklets” – VATA, Sch 8, Group 3, Item 1
FIRST-TIER TRIBUNAL
TAX
HARRIER LLC Appellant
- and -
TRIBUNAL: JUDGE ROGER BERNER
MICHAEL TEMPLEMAN (Member)
Sitting in public at 45 Bedford Square, London WC1 on 24 – 25 October 2011
Leslie Allen, Solicitor, DLA Piper UK LLP, for the Appellant
Owain Thomas, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2011
DECISION
1. Harrier LLC (“Harrier”) appeals against a decision of HMRC, in a letter dated 19 May 2010, to refuse a voluntary disclosure for an alleged amount of overpaid output VAT in respect of certain supplies made by Harrier to, amongst others, Hewlett Packard and Tesco. The decision relates to the VAT periods 06/06 to 12/09, and the amount of alleged overpaid VAT is £545,800.66.
2. The dispute concerns the correct treatment of the supplies Harrier makes in relation to what are termed “photobooks”. Put briefly, Harrier says that its supplies are of goods, and that those goods are books or booklets and as such the supplies of them are zero-rated within Item 1, Group 3, Schedule 8 of the Value Added Tax Act 1994 (“VATA”). HMRC, on the other hand, say that, firstly the photobooks in question are not books or booklets for the purposes of the legislation, and secondly that Harrier’s supplies in this respect are not properly to be viewed as supplies of goods (the photobooks themselves) but are instead supplies of photographic services which do not fall within the zero-rating provision.
(1) Whether the supply of “photobooks” is a supply of goods, and if so whether such supply is a supply falling within the definition of “books, booklets, pamphlets and leaflets” and therefore zero-rated by virtue of Item 1, Group 3, Schedule 8 VATA.
(2) Alternatively, whether the supply of “photobooks” constitutes a supply of services, in particular photographic services.
(3) In so far as it is determined that a supply of “photobooks” is in principle capable of falling within either (1) or (2) above, what are the characteristics of the supply that determine whether the supply falls within (1) and (2)?
4. Harrier was represented by Leslie Allen of DLA Piper. Owain Thomas appeared for HMRC.
5. We had witness statements for Harrier from Mr Graham Clark, the finance director and company secretary of the company since March 2004, and from Mr Andrew Bascombe, the IT director of Harrier since January 2001. For HMRC, we had a witness statement from Mr Michael Hill, a higher officer of HMRC, who was engaged in a review of the voluntary disclosure with which we are concerned. Each of these witnesses gave oral evidence and was subject to cross-examination. We also had a bundle of documents.
6. From the evidence before us we find the following material facts.
7. Harrier is a limited liability company registered in the State of Maryland, USA. It is registered under the Companies Acts as a foreign company.
8. Harrier’s business is currently that of a high-tech digital printing, photo-processing and personalised gift manufacturing company. It was originally solely focussed on its photo-processing business, under the well-known trading style of “Truprint”. This included processing analogue film sent to the company in a freepost envelope, with the developed printed photographs and negatives being received by the customer through the post a few days later.
9. With the onset of digital photography the world of analogue film has all but gone. It has given way to internet driven, digital photo processing. Harrier’s business has changed from a “direct to consumer mail-order photo processing” business to a wholesale “business to business” digital photo-processing operation, and expanding into digital printing and personalised gift manufacturing.
10. The photobooks business is largely web-based. The Truprint brand is now more commonly associated with a website that is operated by Hewlett Packard under licence from Harrier. This creates what is described as a co-brand relationship between Harrier and Hewlett Packard in relation to Truprint. Hewlett Packard also has its own website in the UK called “Snapfish”; Harrier is one of the suppliers dealing with the fulfilment of orders for that website.
11. In addition, Harrier produces photobooks for customers who create their products by uploading images to kiosks in high street stores, such as Tesco, Sainsbury and Asda.
(1) Following registration, the customer will navigate to the “Photo Books” page. This exhorts the customer to “Get creative with personalised photobooks! Create custom books to celebrate birthdays, special occasions, new babies, or even archive favourite family recipes.” The different products (which we shall consider later) are described.
(2) The customer can then navigate to a new page for the type of photobook chosen. The customer chooses photos from albums that are uploaded by the customer, and other images. The images chosen by the customer may be of anything: they could be photographs from a digital camera uploaded to the website, text, drawings, sketches, handwritten text and printed material, which are scanned and uploaded to the website.
(3) Those photos and other images are then used to populate the particular photobook format that has been selected. The customer chooses the layout for each page and the relevant image is then dropped into a template or slot. The layout is shown, with the position of the photo or text, and with space for additional text to be uploaded or added by the customer. Although Harrier’s own processes can accommodate any size of printed book, there is a limit of 120 -150 pages that can be ordered through the websites. There are also restrictions on page numbers for individual products.
(4) Once the customer has populated the pages with all the desired material, a choice is made of the colour of the cover, and the quantity of the order. The price is calculated by the site and an order can then be placed and confirmed.
13. Harrier has no control over these websites, including Truprint, nor any technological involvement with them. Its only involvement is on the marketing side.
14. Once the customer has placed the order, Harrier is sent an electronic data file for each page of the photobook that the customer has created, accompanied by instructions about exactly what product to make and the delivery address in a further electronic file. Harrier imports the individual page data files into pdf files (multi page computer data files, designed for printing). Once the pdf file has been created, it is submitted to the printer. The printed sheets are then guillotined and bound as required, in the same manner as book manufacturing. All photobooks are printed on Indigo presses. The process is very much a physical process with little involvement of computer data processing. The process does not involve any photographic developing.
15. Once the photobook or photobooks have been printed Harrier delivers the product either to the customer directly or to the retail store through whose site the order was made. All content uploaded by the customer is personal to that customer, and the customer has to confirm that it owns the copyright or has permission to use the content. Harrier cannot sell the photobooks it produces on the open market. None of the photobooks has an ISBN number; nor is any copyright information included in the print.
16. The relationship between Harrier and Hewlett Packard in respect of photobooks is governed by the terms of a Co-Branded Photo Center Agreement effective from 1 August 2008, which refers back to a Cooperation Agreement dated 14 April 2005, as subsequently amended. The Cooperation Agreement includes the grant of various licences to Hewlett Packard, and for the provision by Harrier of what are described as “photofinishing services”, of which Hewlett Packard is the retailer. These “photofinishing services” are defined as meaning both the photofinishing services and products, including gifts and customer support as more particularly described in two exhibits to the agreement.
17. In the first of those exhibits the “photofinishing services” are described in very generic terms. Harrier’s obligations are to provide (a) photofinishing services capable of extracting images in digital form from links, interfaces and other connections from the Hewlett Packard products and sites; (b) a digital photo-processing lab to fulfil all orders for photofinishing services”; (c) resources to continually increase the quality of the photofinishing services (including colour rendition) as mutually agreed; and (d) access to order data required for Hewlett Packard customer support.
19. Harrier’s relationship with Tesco is governed by a Services Agreement. We were shown the agreement which commenced on 1 December 2010, outside the period to which this appeal relates. That agreement recites that Tesco wishes to appoint Harrier as its provider of personalised gifts and photographic prints both in stores and online, and that Harrier wishes to be appointed to provide services to Tesco.
20. In this agreement both “Products” and “Services” are defined by reference to separate schedules. The services are described separately as “Online service” and “In-store service”. As regards the Online service, Harrier undertakes to supply and produce the relevant Products ordered by customers online. Harrier also agrees to provide support services, including promotional support, and to deliver the Products to the customer’s home or to the relevant Tesco store within a specified period. The Products are listed in a separate schedule, and again range from regular prints, through photo gifts, to memory books and various descriptions of goods.
21. We were provided with a number of examples of the photobooks produced by Harrier which are concerned in this appeal. The following is our own description taken from our own observations of the items exhibited:
(1) 3” x 2” Mini memory book. This consists of a bound series of single photo images on both sides of the leaves within it. The leaves have the character and appearance of thin glossy paper, and not of photographic prints. Its cover and back is a little thicker than the leaves within. The cover has a photo image and a title, but there is otherwise no text.
(2) 6” x 4” Flipbook. This comprises single photo images on glossy paper bound together by spiral binding. Each leaf has a single image on one side only and has the character and appearance of an individual photographic print. Some of the images are accompanied by short textual descriptions on the same page as the relevant image. The back cover is the same quality as the leaves, but there is a front cover of translucent plastic material. (In the example we had there were two leaves of this translucent plastic at the front. We think it likely that the second sheet should have been at the back.)
(3) 7” x 5” Flipbook. Apart from the example we had having only one sheet of translucent plastic on the front cover, and also having a translucent sheet on the back, this was identical in description to the 6” x 4” Flipbook (save only for its size).
(4) 7” x 5” Memory book (“Everyday memory book”). This consists of a series of leaves bound in a medium soft card cover, of greater thickness than the leaves within. The front cover has a window through which the photo image on the first inside leaf can be seen. The images in this case are on both sides of the inside leaves, and range from single to multiple images per page. Images other than photos are included, and there are text descriptions on many of the pages. One page consists entirely of text written by the customer.
(5) 8” x 8” Photobook. This has a hard cover front and back with a downloaded photo and a title on the front cover. A downloaded photo also appears on the back cover. Inside is a blank non-glossy sheet front and rear. The leaves are glossy and include photo images, between one and four per page, and text, on both sides of the paper. Some leaves have photo images only, some have only text, and others a mixture of the two.
(6) 11” x 8” Classic memory book. This has a hard linen cover front and back, and a dust jacket with a full page photo image on the front, including title, and a small image on the back. There is an inside front page which has the title printed on it. A blank back page – save only for a logo, barcode and product description – is also included. The inner leaves comprise a mixture of photo images, some full-page, some not, and text, on both sides of the page.
(7) 11” x 8” Classic memory book. This is effectively the same product as that described in (6), except that it does not have a dust jacket and its front cover has a window through which the first leaf – a title page can be observed. In this example the content is principally photo images, with text confined to headings and short descriptions.
(8) 11” x 8” Picture cover book. This product is similar to (6) and (7), but its front cover is a laminated full-page photo image, and its back cover is also laminated, with a smaller photo image and some text. Although its photographic pages are similar to those in (7), this example was distinguished by having 7 pages wholly devoted to text at the beginning.
(9) Picture me book. This is a small bound volume comprising leaves of laminated card bound together. The cover and the inner leaves are of identical material. Most of the content appears to have been pre-populated with pictures. The added content from the customer is limited to pictures of a child’s or children’s faces that are superimposed into the spaces in the pictures provided.
“Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in Article 99 may continue to grant those exemptions or apply those reduced rates.
The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must be adopted for clearly defined social reasons and for the benefit of the final consumer.”
“ Group 3 — Books, etc
Item No
1 Books, booklets, brochures, pamphlets and leaflets.
2 Newspapers, journals and periodicals.
3 Children's picture books and painting books.
4 Music (printed, duplicated or manuscript).
5 Maps, charts and topographical plans.
6 Covers, cases and other articles supplied with items 1 to 5 and not separately accounted for.
[Note: Items 1 to 6—
(a) do not include plans or drawings for industrial, architectural, engineering, commercial or similar purposes; but
(b) include the supply of the services described in paragraph 1(1) of Schedule 4 in respect of goods comprised in the items.”
“(2A) A supply by a person of services which consist of applying a treatment or process to another person's goods is zero-rated by virtue of this subsection if by doing so he produces goods, and either—
(a) those goods are of a description for the time being specified in Schedule 8; or
(b) a supply by him of those goods to the person to whom he supplies the services would be of a description so specified.”
26. As we outlined at the beginning of this decision, there are essentially two issues between the parties. Taking them in the order in which we intend to address them they are, firstly, whether, as Harrier says, the supplies it makes in respect of photobooks are single supplies of goods, or, as HMRC argue, are supplies of services, namely photographic services, which are not zero-rated, and secondly, if the supplies are supplies of goods, whether they are supplies of books or booklets, so as to be zero-rated.
27. Mr Thomas submitted that the analysis of the contracts entered into by Harrier shows that the supplies it makes are supplies of services. The supplies made by Harrier are not to the final consumer, but to the retailer, or website operator. Those supplies, he argued, were described as services in the relevant agreements. Mr Thomas argued that Harrier is not supplying books to its customer. It is supplying a digital photograph printing and processing service. The content is provided by the ultimate consumer, via the website of Harrier’s customer. Harrier has no influence over the content. Accordingly, Mr Thomas reasoned, Harrier’s role is the provision of a service to its customer.
29. In our view, on this analysis, the supplies of photobooks by Harrier to Hewlett Packard are supplies of goods. We accept, however, that the obligations of Harrier in respect of those supplies include elements of service provision, as set out in the description of “photofinishing services” in the first of the exhibits to the Cooperation Agreement to which we referred above.
30. A similar analysis applies to the Tesco Services Agreement. That agreement also covers both services and goods. The services and goods are covered by separate schedules, with memory books firmly in the schedule related to goods. As regards the online service, Harrier agrees to provide certain services related to the supply of the goods. We find that in this respect also, Harrier’s supply of the photobooks is one of goods, with some related services.
32. In this context it suffices for us to refer only to one authority, that of the ECJ in Levob Verzekeringen BV and another v Staatssecretaris van Financiën (Case C-41/04) [2006] STC 766. That case concerned a supply of a customised version of standard software. The contract broke the price down into a sum payable for the basic software and the cost of customisation. The issue was whether there had been separate supplies of the basic software and the customisation services or a single supply. The ECJ held that there was a single supply which, in the light of the degree and importance of the customisation process, had to be classified as a supply of services.
33. Referring to the earlier case of Card Protection Plan Ltd v Customs and Excise Commissioners (Case C-349/96) [1999] STC 270, the Court affirmed that a transaction which comprises a single supply from an economic point of view should not be artificially split, and that there is a single supply in particular where one or more elements are to be regarded as constituting the principal supply, whilst one or more elements are to be regarded as ancillary supplies which share the tax treatment of the principal supply. The Court also held that the same is true where one or two elements or acts supplied by the taxable person are so closely linked that they form, objectively, a single, indivisible economic supply which it would be artificial to split.
34. Mr Thomas argued that even Harrier established that it supplies goods to its customers (which we have found to be the case) the digital photographic printing service provided was the dominant element such that the particular format of printing is a means of better enjoying that service, and is an enhancement on the simple provision of printed photographs. We do not agree. In our view, looking at the objective characteristics of the supplies that Harrier makes, the principal supply is clearly that of the photobooks themselves, a supply of goods. The services that surround that supply, including the making available of the production process, are ancillary to the supply of the goods. Those supplies are so closely linked that, viewed objectively, they form a single, indivisible supply, and that is, in this case, a supply of goods. This is not a case, unlike Levob, where an existing product was customised to such an extent that the customisation service dominated. Here what Harrier does is provide a product, which it produces to a customer specification. That supply of the product itself is the predominant supply, and the composite supply by Harrier is accordingly a supply of goods.
39. In light of our conclusion on the nature of the supplies made by Harrier, the real issue is whether the photobooks supplied by it are “books or booklets” within Item 1, Group 3, Sch 8 VATA.
40. Mr Thomas referred us to Article 110 of the Principal VAT Directive, and to the derogation it provides for the zero-rating regime. In this context he took us to the judgment of the ECJ in Talacre Beach Caravan Sales Ltd v Customs and Excise Commissioners (Case C-251/05) [2006] STC 1671. He submitted that the provisions of the Directive laying down exceptions to the general principle that VAT was to be levied on all goods and services supplied for a consideration by a taxable person were to be interpreted strictly. He argued that the zero-rating regime must be interpreted so as to comply with the provisions and conditions setting out the scope of the derogation. He referred in particular to paras 17 and 18 of the judgment:
“17. It should be noted from the outset that, in authorising member states to apply exemptions with refund of the tax paid, art 28(2) of the Sixth Directive lays down a derogation to art 12(3) thereof, which governs the standard rate of VAT.
18. It is apparent, secondly, from the wording of art 28(2)(a) of the Sixth Directive that the application of exemptions with refund of the tax paid is subject to a number of conditions. Those exemptions must have been in force on 1 January 1991. In addition, they must be in accordance with Community law and satisfy the conditions stated in the last indent of art 17 of the Second Council Directive 67/228 of 11 April 1967 on the harmonisation of legislation of member states concerning turnover taxes—structure and procedures for application of the common system of value added tax (JO L71 14.4.67 p 1303 (S Edn 1967 p 16)), now repealed, which provided that exemptions with refund of the tax paid could only be established for clearly defined social reasons and for the benefit of the final consumer.”
42. In Talacre Beach the taxpayer was relying on the terms of the principles, those regarding single supplies, of the Sixth Directive. In this case we are not concerned with the construction of the terms of what is now the Principal VAT Directive, but with the meaning of the domestic legislation which is permitted under the terms of the derogation. It is right that exemptions (including, in this context, zero-rating) in the Directive fall to be construed strictly (but not, it should be observed, restrictively; see Commissioners for Customs and Excise v Axa UK plc (Case C-175/09) [2010] STC 2825, at [25]), but what we are concerned with here is the construction of the UK domestic provision, which will fall to be construed in accordance with ordinary principles of statutory construction. Nor is this case concerned with any items that are specifically excluded from the zero-rating treatment.
43. If, applying a strict construction of the derogation provisions of the Directive, we were to conclude that the UK domestic legislation went too far, that would not assist HMRC. It is a well-established principle that, whereas an affected person can rely upon the Directive if the domestic legislation does not properly implement it, such reliance is not available to the Member State (see, for example, Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) [1986] QB 401, judgment para 48). If therefore the zero-rating provisions go further than the derogation would allow, the taxpayer is entitled to rely on the domestic provisions.
“In my judgment, the English word 'book', although it always refers to an object whose necessary minimum characteristics are that it has a significant number of leaves, now usually of paper, held together front and back by covers usually more substantial than the leaves, is a word with a variety of possible more particular meanings. For any particular use of the word, its particular meaning will be derived from the circumstances in which it is used. For instance, if a barrister in the clerks' room of his chambers points to a blank counsel's notebook and says to his clerk 'please hand me that book', he would not expect the answer 'that is not a book'. (Mr Tallon surprisingly submitted that a counsel's notebook might not be a book because it was perforated—a point which he also made in relation to a cheque book.) On the other hand if the same counsel, having a substantial collection of law reports and legal textbooks in his room, asked the same clerk to count all the books in his room, he would not expect the clerk to include blank counsel's notebooks in the count. If a testator uses the word 'books', the word obviously has to be understood in the context of the objects which the testator in fact has to bequeath.
In the first instance, the only circumstance here is that the words 'books' and 'booklets' are used in the Schedule to a statute. They are accordingly relevantly devoid of context. Devoid of context, in my judgment the ordinary meaning of the word 'book' is limited to objects having the minimum characteristics of a book which are to be read or looked at. (The same applies to 'booklet', which I think is a thin book perhaps with a rather flimsy cover. I am not sure about the Shorter Oxford English Dictionary definition of booklet as 'a tiny book', since I would not myself call a tiny book with many pages a booklet.) If you ask of a particular object 'is this a book?', you immediately provide a context, which the words in the statute lack. You will get an answer which is affected by the context. If you ask instead what I regard as the right question here, ie 'what is the ordinary meaning of the word “book”?', you should get an answer which accords with the ordinary meaning to which I have referred. As Mr Richards submitted (although he accepted that these diaries and address books might be books or booklets within one possible meaning of those words), people generally think of books as things to be read rather than as blank pages bound together. A filled-in diary of historical or literary interest may be a book because it is retained to be read or looked at. But a blank diary is not a book in the ordinary sense of the word. Likewise a blank address book is not in the ordinary sense a book and it does not become one simply because its name includes the word 'book'. A cheque book is plainly not a book nor, in my view, is it a booklet in the ordinary sense of that word. The fact that in some contexts you would say of a blank diary that it is a book within one possible meaning of that word does not mean that it is a book within the ordinary meaning of the word.
There is in my view no reason for reading the words 'books' and 'booklets' in item 1 of Group 3 of Sch 5 to the 1983 Act in a more extended meaning than their ordinary meanings.”
“24. The Appellants' wedding book shared many of the physical characteristics of a book, in that it has leaves of paper bound together within a hard cover. We would, however, agree with the Respondents' observation that the pages were thicker than what would normally be found in a book. We consider that the wedding book was a pictorial record of a wedding which was of interest only to the persons immediately connected with the event. The text in the wedding book did not convey information and had no value in its own right, which could be deleted if the bride and groom did not want it. The Appellants marketed the wedding book on their websites as a wedding album. The fact that the pictorial record of the wedding book was permanent and could not be altered after publication did not, in our view, alter the fundamental character of the book as a wedding album. The Appellants' wedding book was a consequence of advances in photographic technology which increased the range of physical manifestations of wedding albums. We find the term wedding album should not be restricted to a traditional form which allowed the removal and insertion of photographs. Such a restriction would be contrary to the Community principle of equal treatment which ensures that similar goods in competition with each other, are not treated differently for the purpose of value added tax. We conclude that the Appellant's wedding book was to all intents and purposes a wedding album.
25. We find that the Appellants' wedding book did not come within the ordinary meaning of a book. The wedding book in essence was a collection of photographs which was of interest only to the persons immediately connected with the wedding. The text included in the book was optional, and if incorporated did not convey information and had no value in its own right. The functional characteristics of the wedding book as a wedding album outweighed its physical similarities to a book. We hold that the Appellants' supplies of a wedding book were standard rated for VAT purposes.”
53. With respect, we are unable to follow the tribunal’s approach in Risbey’s. In our view it does not properly follow the approach adopted in Colour Offset, namely to consider the ordinary meaning of “book” as one having the minimum characteristics of a book which is to be read or looked at. The basis of the tribunal’s decision was that the fundamental character of the item in question was as a wedding album, essentially because it was in essence a collection of photographs which was of interest only to the persons immediately connected to the wedding. It seems to us that this analysis falls into the error of attaching a label to an item which does not feature in any specific exempting or zero-rating provision, and concluding that such an item must therefore be standard-rated (see Bophuthatswana National Commercial Corporation Ltd v Customs and Excise Commissioners [1993] STC 702, per Nolan LJ at p 708). The diaries and address books in issue in Colour Offset did not fall outside the description of books or booklets because those labels could be attached to them; they failed to satisfy the test of being a book or booklet because, on account of the blank pages within them, they did not fall within that description, according to the ordinary meaning. We do not ourselves consider that it follows from the application of the description “wedding album” to something that has the characteristics of a book that the item is not a book for VAT purposes. A wedding album will in many cases not have the characteristics of a book, but if it does, we can see no reason why it should not be a book for these purposes.
(1) 3” x 2” Mini memory book. We find that this is a booklet. It has the external appearance of a booklet, and although it consists entirely of photographic images, the pages on which those images are printed have the appearance and quality of the pages of a booklet.
(2) 6” x 4” Flipbook. In our view this fails the test. It does so both on account of its spiral binding which does not satisfy the minimum characteristics for the external appearance of a book or booklet, and the fact that its leaves have the quality and appearance of individual photographic prints, and not pages of a book. Accordingly, we find that this is not a book or a booklet.
(3) 7” x 5” Flipbook. This fails for the same reasons as its smaller cousin and we make the same finding in respect of it.
(4) 7” x 5” Memory book (“Everyday memory book”). We find that this is a booklet. It has the appearance of a thin book and its pages, which include both photographic images and some text, have the appearance and quality of the pages of a booklet.
(5) 8” x 8” Photobook. We find that this is a book. Its external appearance, including its hard covers front and back, and its spine, has the appearance of a book. Inside its front and back sheets also have the appearance of a book, and its pages have the appearance and quality of the pages of a book.
(6) 11” x 8” Classic memory book. We find this is a book. Its hard linen cover, and dust jacket have all the external appearance of a book. The inside pages also have the appearance and quality of the pages of a book.
(7) 11” x 8” Classic memory book. Likewise we find that this is a book. The absence of a dust cover, and the fact that the title page can be observed through a window in the front cover, do not make it distinguishable from the product in (7).
(8) 11” x 8” Picture cover book. This again we find is a book. It is again distinguishable from similar products in (6) and (7) only in the style of its cover. That does not detract from its appearance as a book in common with those products.
(9) Picture me book. Although this product has a cover and back of identical material to the inner leaves, and those leaves are of laminated card and not paper, we consider that it nevertheless has both the external and internal appearance of a book. If we are wrong on this we would find that it should be zero-rated as a children’s picture book in Item 3, Group 3.
68. We provide the following responses to the common or related issues as directed:
(1) Whether the supply of “photobooks” is a supply of goods, and if so whether such supply is a supply falling within the definition of “books, booklets, pamphlets and leaflets” and therefore zero-rated by virtue of Item 1, Group 3, Schedule 8 VATA.
The supply of photobooks is a supply of goods. The supplies of certain photobooks identified in this decision fall within that definition and are zero-rated. Certain others, also identified, do not. The basis for the distinction is set out in this decision.
(2) Alternatively, whether the supply of “photobooks” constitutes a supply of services, in particular photographic services.
The supply of photobooks does not constitute a supply of services.
(3) In so far as it is determined that a supply of “photobooks” is in principle capable of falling within either (1) or (2) above, what are the characteristics of the supply that determine whether the supply falls within (1) and (2)?
Not applicable. Although we found that the activities of Harrier in relation to the photobooks did involve the performance of certain services, we found, for the reasons set out in this decision, that the composite supply was a supply of goods.
This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.