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A new ruling by the EU could spell the end of certain kinds of novelty books for young children, independent publisher Tony Potter has warned. He is calling on children’s publishers across Europe to fight the ruling which defines "carousel" novelty books as "playsets", rather than books, which makes makes them liable for VAT.
Potter has fought a lengthy legal case over the duty classification of these novelty books and warned: "I believe that this is the thin edge of the wedge. This ruling makes the definition of what is a playset and what is a book hard to ascertain." He believes that "almost any book" for preschool children that has a small amount of interactivity could now be challenged by HM Revenue & Customs (HMRC). "I persaonally feel it’s a tax on reading and learning and on children using manipulatives in learning to read."
Potter originally won an appeal against HMRC’s attempts to classify carousel books as playsets. An HMRC tribunal decided instead that the binding tariff code of 4903 (picture books) was the appropriate duty classification code. The decision applied across the EU.
However, Potter was informed by HMRC this month that it had taken the case to Europe as the decision of the tribunal was "divergent" from EU rules. He said: "As a consequence, the EU ruled that the tribunal was wrong and that the original duty classification stands—that carousel books are ‘playsets’." Publishers will, therefore, have to pay the new VAT rate on carousel books from Monday 15th March.
Potter said he hopes a larger children’s publisher will take on the case in order to have it referred to the European Court of Justice, the only jurisdiction that can now make a judgment on the case.
In the meantime, he said: "I will stop making this type of book because the VAT makes them uneconomic. You can’t increase the price of a £10 book at retail in the present climate. Our production costs have risen dramatically in the past 18 months and the new VAT charge of 17.5% on this type of book makes them unviable."