Satellite broadcaster BSkyB is understood to have lost a landmark VAT tribunal that will push up its annual tax bill by almost £50m.
Sources within Customs & Excise said BSkyB had lost its appeal over a Customs ruling last May that its monthly TV guide should be subject to the standard VAT rate of 17.5%.
An official verdict is not expected to be published before the end of the month.
But, if upheld, it will erode the principle that magazines are zero-rated for VAT and send shock-waves through the publishing industry.
BSkyB insists the guide – which has a notional cover price of £3.25 and is sent to around seven million digital and analogue subscribers – should qualify for a zero VAT-rate because it is a separate supply to its TV channels.
But Customs argues the guide, supplied without extra charge, is bundled into the broadcaster’s entertainment service. Since last May BSkyB has been forced to pay 57p in VAT on each guide distributed.
BSkyB refused to comment but it has said in the past it is prepared to take Customs to the High Court if it were to lose the tribunal. The verdict will alarm cable giants like Cable & Wireless which publishes a TV guide for subscribers and the AA, which produces a free quarterly magazine for its members.
Ernst & Young indirect tax partner Peter Jenkins said: ‘Companies can put whatever price on a magazine they want. But Customs fear it will become a VAT avoidance scheme.’
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