A while ago, I wrote of the tricky situation potentially faced by UK OA publishers operating on a cost-pool basis/consortial basis. After our accountants gave a report on this about a month or so ago, I sought confirmation from HMRC that it was, indeed, the case that these models do not count as a direct supply of a service. Models that provide enormous and efficient sector-wide benefits, like open access, may not, in such scenarios, constitute a “direct and immediate” supply to the organizations that pay, because everyone can read the material.
HMRC wrote to me today to give the full, official response. Three initial points/warnings:
- This may not apply to different organizations with a different structure or system of benefits.
- I am not a lawyer. This is not legal advice.
- The following may be very boring for anyone not interested in the technicalities of financial models for open access.
In any case, HMRC advised the following:
In order for a supply for a consideration to exist, there must be at least two parties and a written or oral agreement between them under which something is done or supplied for the consideration. Also, there must be a direct link between the supply and the consideration; the supplier expects something in return for his supply and would not fulfil his obligation unless he thought that payment would be forthcoming VATSC50000 provides examples of when a payment is made but there is no supply for VAT purposes, such as donations, grants and project funding. This explains that where any benefit received by the payer in return for the payment is incidental, the payment is not consideration for the supply of such benefits. The primary purpose of the OLH membership fee is to fund the open-access to academic journals. The membership benefits of a seat on the Board, yearly reports and listing on the OLH website, are the only benefits provided and are incidental to the primary purpose; it is not the aim of the members to obtain such benefit.
It is, therefore, HMRC’s view that the membership fee is not a consideration for the benefits, or any other supply, and is outside the scope of VAT.
This is because, as per the OLH membership agreement:
4.1.2 members should be aware that they are not paying for their own authors to publish, nor for a subscription, but rather to build and sustain and govern a collectively-funded platform that returns extremely good value and that could not exist without such investment.
In any case, this allows us to now open in the UK and there should be more on this very soon!