In Story Terrace Limited v HMRC [2025] TC09725, the First Tier Tribunal (FTT) found that a company providing personalised ghost-written books was making a zero-rated supply for VAT purposes. The book was the predominant element of the supply despite significant research, writing, and design services, which would have been standard-rated in isolation.
Story Terrace Limited (Story Terrace) was established by its director, Mr Bruining, who was inspired to set up the business after he found that details of his grandfather’s stories faded with time.
- Story Terrace’s mission was to turn one million life stories into books using professional ghostwriters by 2028. In effect, it provided custom autobiographical books.
- After being matched with a ghostwriter and following questionnaires, customers of Story Terrace attended in-depth interview sessions with their ghostwriter.
- The book was then written by the ghostwriter in stages, involving a story outline, a draft sample of a chapter and finally concluding with a draft of the entire story.
- The customer would upload images to include in the book, selecting the chapters in which they appeared.
- After the customer approved the proofs, the books went to print. This resulted in the production of four full-colour hardbacks, as well as a digital copy.
- HMRC argued that Story Terrace made a single supply of standard-rated ghost-writing services for VAT purposes. In HMRC’s view, this was the predominant element of the supply and the printed books were a mere output.
- Story Terrace disagreed and appealed to the First Tier Tribunal (FTT) on the basis that it made a Zero-rated supply of books; the final printed books were the focal point of the process, and the writing services were a means to that end.
HMRC and Story Terrance agreed that the supplies made were Single supplies for VAT purposes.
The FTT sought to answer the question, ‘What is the predominant element in what the typical consumer thinks he or she is acquiring?'
Its approach was to make an overall assessment of all elements of the supply to determine their importance to the typical consumer, both qualitatively and quantitatively, and then decide which predominated.
The FTT found that:
- Story Terrace’s final outputs were books.
- While HMRC were correct to say that aspects of Story Terrace’s supply would have been standard-rated if they were supplied on their own, that was not a barrier to concluding that the supply was zero-rated.
- A customisation service is not automatically the predominant element of a supply.
- While HMRC’s VAT Notice 701/10 (Zero-rating books and printed matter) stated that original or specialist items are standard-rated, such a notice is not the law; it is HMRC’s view of the law.
- The decision in Gray & Farrar established that the starting point for the characterisation of a transaction/supply for VAT purposes, which is governed by a written agreement, is the written agreement itself.
- In this case, the contract reflected the typical consumer’s purpose of ensuring that a book was produced to be shared and enjoyed in its physical form.
- That was the economic and commercial reality of the transaction, and its economic purpose.
- The bespoke nature/aspect of Story Terrace’s supplies did not dominate such that the FTT could conclude that Story Terrace was making standard-rated supplies.
- In this case, the contract reflected the typical consumer’s purpose of ensuring that a book was produced to be shared and enjoyed in its physical form.
- The typical consumer of Story Terrace would have regarded the provision of the book as qualitatively the most important element of the supply.
- In light of the contract, the provision of the book was the predominant element of the supply.
The appeal was allowed.
Useful guides on this topic
Books and Printed Matter
What are the VAT rules on books and printed matter? What about e-publications?
Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?
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