The craze for adult colouring books has come to the attention of the taxman with HMRC officials reviewing the zero VAT status with a mind to possibly charging VAT at the full 20% rate
Now HMRC plans to review whether to charge VAT on the adult colouring books in a move which could see the tax applied retrospectively on the currently VAT exempt books, which could raise up to £4m in VAT a year.
Print books and children’s colouring books are zero-rated for VAT, but it is understood that HMRC is challenging the idea that adult colouring books and dot-to-dot titles, where some pages can be pulled out, can be classed as a book.
HMRC also believes adult colouring books could be classed as 'uncompleted' books, which currently attract the 20% rate of VAT.
Stamp albums are subject to VAT, as are books which are classed as stationery, such as diaries and address books.
The book trade is not happy with the potential tax hike. In a statement, Michael O’Mara, chairman of Michael O’Mara Books said: ‘Early this year, we, along with several other publishers, were told by HMRC that they had recently decided to standard-rate for VAT so-called adult colouring books.
‘It is our view that this decision flies in the face of the relevant legislation. We and other publishers, following the lead of the Publishers Association, are fighting this decision and we hope that HMRC, on reflection, recognise that they have got this wrong.’
Laurence King, publisher of Johanna Basford’s Enchanted Forest, which is one of the most popular titles, has said he plans to add VAT to the titles for the time being until the issue is clarified.
King said: ‘I strongly support the position of the PA that all colouring books should be classified as books, not stationery, and therefore not subject to VAT. Many people just buy them for their beauty without thinking of colouring them in, much as they buy coffee table books. Further, it seems illogical that, for example, crossword puzzle books and Sudoku should be VAT exempt but adult colouring books are not.’
A HMRC spokesperson confirmed the department was meeting with publishers soon to discuss VAT on adult colouring books, which accounted for about £20m of sales in 2015.
In a statement, HMRC said: ‘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.’