United Kingdom VAT & Duties Tribunals Decisions

Book People Ltd v Customs & Excise [2003] UKVAT V18240 (25 July 2003)

ZERO-RATING – Picture book – Contents designed to be extracted and assembled into model house –Whether a book – Yes – Appeal allowed – VAT Act Schedule 8 Item 1 Group 3

LONDON TRIBUNAL CENTRE

THE BOOK PEOPLE LIMITED Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

SHAHWAR SADEQUE MBCS

Sitting in public in London on 8 July 2003

Robert Facer of Baker Tilly, accountants, for the Appellant

Dr Ian Hutton, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION

1. The Appellants, The Book People Ltd, appeal against the decision of the Commissioners that a product known as "The House That Jack Built" ("the Product") is a toy and not a book and that therefore supplies of that item attract VAT at the standard rate.
2. Item 1 of Group 3 in Schedule 8 to VAT Act 1994 zero-rates supplies of "books". Item 3 zero-rates supplies of "children's picture books".

Features of the product

3. The product is 10½ inches wide, 13 inches tall and its spine is 9/10 of an inch across. The cover is of a hard cardboard material.
4. On the front are the title words 'The House That Jack Built' written 1-2 inches below the top ream. Immediately above those words is the surface of a see-through bubble inside which are plastic nuts and bolts and a spanner. Below the title words and in smaller lettering are, to the left, the words 'Read the Story' and 'Build the House'; and to the right is a logo containing the words – A Nuts and Bolts Story Book – below which are the words 'A "Story Book" that assembles into a play house'. The remaining two thirds of the front cover contain a picture of a two-storey house, a man with a hammer, a girl, a dog, two cats, three mice and one bird. Along the bottom are the words 'A "Nuts and Bolts" Story Book'. The spine has the words '"A Nuts and Bolts" Story Book' and 'The House That Jack Built'.
5. The back of the cover has a picture of the house opened up to see inside the rooms. At the top left are the words 'The House That Jack Built' and 'A "Story Book" that assembles into a play house!' On the right are these words:

"We learn through play, and when we play we discover new things about ourselves and about the world around us. This Nuts and Bolts story book provides a number of levels of interactive play:

Read the story.

Look at the pictures to see what you can find.

Solve the mystery!

Build the play house using the nuts and bolts and the wrench. See the inside back page for instructions.

Tell the story again using the stand up characters.

Play out different stories in the play house:

a. Jack comes home from work.

b. Cat plays hide and seek with Mum.

c. Time for bed.

There is a warning as follows:

"Choking Hazard: Small parts. Not for children under 3 years".

6. The front inside of the cover has the same picture and the same words as the back cover.
7. The back inside contains at the top the bubble housing the nuts, bolts and spanner. Most of the rest of it contains instructions as to how to make Jack's house. There are words and diagrams.
8. Attached to the left of the back cover by nuts and easily unscrewable bolts are seven laminated sheets of card. This card material is thinner than the hard cardboard cover of the product. The first four of these are shaped and decorated as the four walls of Jack's House, outside and inside. The sheet making the first wall portrays the front door and three windows and goes up to a pitched roof. There is a picture of Jack with his hammer. Across it are written the words:

"This is the cat that lived in the house that Jack built …"

The back of the sheet depicts rooms inside and across that sheet are the words:

"This is the dog that chased the cat that lived in the house that Jack built …"

The other three of those four sheets depict the outside and inside of the house and on each side are written further words of the nursery rhyme. In all there are about 120 words.

9. The fifth sheet consists of pop-out shapes from which can be assembled (i) models of Jack and his wife and two children and a dog and cat and (ii) stairs and stair walls. Once the pop-out shapes have been removed from this sheet, it has no further part to play in the use of the product. The sixth and seventh sheets are the downstairs floor and the roof of the house. These are designed to bolt into the assembled model.
10. The top four sheets are hinged and can be opened up to about 80° with the result that the fronts and backs of each sheet can be read; those sheets are not designed to be completely opened so as to lie flat when still bolted to the cover.
11. Each sheet except the last is numbered on both sides.
12. All seven sheets are removable by unscrewing the attaching bolts. The house, once assembled, can be dismantled. Six out of the seven sheets can be re-housed within the cover. The fifth sheet (i.e pages 9 and 10) which contains the pop-outs can in theory be replaced but the pop-outs, once assembled, are not designed to be replaced.
13. Overall the product looks from the outside like a book subject to one feature. This is the protruding bubble at the top front which clearly shows the nuts, bolts and spanner as loose parts.
14. A price of £11.99 is printed on the back cover. The evidence showed that the product was never sold by the Appellant for more than £4.99. They sold it through distribution agents who took orders from places of work (where a specimen would be displayed in, e.g. a canteen) and over the Internet.

Contentions

15. The Commissioners say that the product is not a book in the ordinary natural meaning of that word. It does not have pages. Instead it has laminated sheets cut to the shape of the models; and the member of the public would see it, overall, as bolted- together sheets of a model house. Moreover, said the Commissioners, the primary function of the product as perceived at the point of sale is the same as a toy. This, say the Commissioners, is evident from the text on the cover of the product. The words "Story Book" are only used in two places. First as part of the phrase "A Nuts and Bolts" Story Book which draws attention to the product's function as a toy. The words "A Nuts and Bolts" are given stronger emphasis over the words "Story Book" and the latter phrase appears in inverted commas. The use of inverted commas suggests that the subject matter is something other than what the literal words would suggest. Thus, it is argued, the descriptions on the inside cover indicate to the customers that they are not buying a book; they are buying a toy. The back cover and the inside cover state that "we learn from play" and suggest ways in which the product can be played with. Of the 100 or more words used on the inside covers, only three, i.e. "Read the Story", could be interpreted as a suggestion that the product should be used as a book. Further, the text and the diagrams on the internal back cover are exclusively concerned with building the model. In essence, they say, the essential characteristics of the product suggest that it will function as a toy and that it is intended to be perceived as such at the point of sale, particularly bearing in mind that only four of the sheets feature words from the rhyme or easily identifiable pictures. The nuts and the bolts are more a characteristic of a toy.
16. For The Book People, Mr Facer argued that the product is a book. That is what the man in the street would say. It has the normal attributes of a book, namely a hard cover and a hard spine, several numbered pages which are designed to be turned and are fastened to the cover. Moreover it has a narrative text that is designed to be read right through and the instructions put reading the text as the first step in the exercise. Admittedly there are items that are not consistent with its characteristics as a book; these are the nuts, the bolts and the pop-out models. But these do not displace its nature at the point of supply which is essentially a book.

Conclusions

17. The right approach, as we see it is to consider the characteristics and function of the product as these would be perceived at the point of sale. The details of this investigation were set out by Dr A N Brice in EMAP Consumer Magazines Ltd (1995) VAT Dec 13322:

"… the word [Book] should be given its ordinary natural meaning. It is for the tribunal to consider as fact whether as a matter of ordinary usage of the English language the words of the statute apply to the publication before it. It is useful to us what the man and woman in the street would say if they were asked what the publication was. It might be difficult or impossible to define a [book] with precision; the matter is one of impression …"

An ordinary meaning of the word "Book" is found in the Shorter Oxford English Dictionary:

"A collection of sheets of paper or other substance, blank, written or fastened together so as to form a material whole …"

18. We note also that in the decision of May J, in Customs and Excise Commissioner v Colour Offset Ltd [1995] STC 85, it was said:

"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."

19. Applying those tests, we see the product as a book with the added value of being assembled into a model.
20. At the point of supply the product would, in our view, be recognized as a book by the purchaser and indeed by any child. The features that make for the recognition are first that it has a text with a relevant title and that text is directly relevant to each of the laminated sheets contained within the cover. It is as much a "book" as a "children's picture book" in that it contains quite detailed pictures which are directly relevant to the text and are to be looked at in a way that constructively triggers the child's imagination. Second, it looks like a book because it has the physical characteristics of one, namely the hard cover and spine and the numbered and turnable pages attached as close to the spine as possible. Third, the text is significant. Although short and simple, it is an integral part of the product. The text provides both a sequential narrative and a key to the pictures; and it informs the whole concept from first examining the pages then dismantling the product, then assembling the model and finally playing with the finished house and its contents.
21. All but one of the seven sheets are designed to be put back inside the cover and can easily be reinstated. The exception is the sheet which contains the pop-out three dimensional models. The re-assembled package is, we think, as much a book as it was at the point of sale. This feature, i.e. the ability to de-construct the model and re-assemble the product, would be evident to a purchaser at the point of supply.
22. For all those reasons we think that the product is either or both of a "book" or a "children's picture book". We were referred in the course of argument to the tribunal decisions in W F Graham (Northampton) Ltd (1980) VAT Dec 808, Scholastic Publications Ltd (1995) VAT Dec 14213 and to Marshall Cavendish Ltd (1973) VAT Dec 65. We found these references helpful but do not think it necessary to base our reasons on any comparisons.
23. We allow the appeal. We were not asked to make a direction as to costs; but, if asked, we would, as presently advised, be inclined to award The Book People Ltd their costs.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED:

LON/02/1053