THE adult colouring book industry, which is worth an estimated £20m a year to the economy, could soon be paying millions in VAT as HMRC looks to apply a 20% to the popular adult pastime.
Both adult and children’s colouring books are currently exempt from VAT, and that will continue to be the rule of thumb for children’s books, but the government department has confirmed it’s in talks with adult publishers over charging a 20% rate in the future.
“There’s been no change to the rules. Children’s colouring books are entirely free of VAT and there are no plans to change that. We are meeting with publishing representatives shortly to discuss the VAT treatment of adult colouring books,” said a HMRC spokesperson.
Last month, HMRC came under fire from the Association of Taxation Technicians for having “flaws” in its guidance over its VAT flat rate scheme.
Diaries, stamp albums and address books are already subject to VAT, but literary and reference books are currently exempt. More than three million adult colouring books were sold in Britain last year, pulling in just over £20m.
David Scott, tax partner at law firm Harbottle & Lewis, revealed that HMRC is closing in on a range of books which currently are exempt from paying VAT.
“Among those they are querying are about 10 different types of books, I believe. Publishers are keen for HMRC to clarify the issue and define the nature of a book,” said Scott.
James Daunt, managing director of book retailer Waterstones, fears that a 20% VAT rating could have a big effect upon booksellers.
“There needs to be clarity from HMRC around the issue on the definition of books which are VAT-exempt because there is lot of confusion at the moment.
“Retailers will be affected and will owe VAT on their margin of the sale, along with publishers, and if it is confirmed we owe HMRC that it will certainly be a sizeable chunk of money,” continued Daunt, adding that Waterstones has “provisioned” to pay for it.
Last week HMRC won a lengthy VAT battle with Mexican food outlet Chilango, just days after the department surprisingly decided to no longer oppose outstanding VAT reclaim appeals by NHS trusts, with some of those claims dating back as far as 1973.
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