A magazine for satellite TV customers published by BSkyB was used as a tax avoidance scheme that saved the company up to £40m a year.
The broadcaster had been saving millions in VAT by charging satellite customers a nominal £2.20 a month for the Sky magazine, using a tax loophole that has now been closed. Magazines, along with books and newspapers, are normally zero-rated for VAT, and this meant Sky could avoid VAT on a small but significant percentage of revenue. The saving, at about £3 to £4 per person, would have amounted across Sky\’s 10 million subscribers to at least £30m to £40m a year.
Err.
Wasn\’t it Sky\’s customers who didn\’t have to pay £30 to £40 million a year in VAT?
Do we, for example, say that Teh Grauniad is benefitting from not charging VAT to customers? Or that cursomers are benefitting from not paying VAT on Teh Grauniad?
Not an accountant but as I understand it, the customer paid the same before as now. What was happening is Sky was converting £1.76 + VAT of the monthly rental to £2.20 of magazine. I assume the magazine cost less than 44p to print, the balance being a small extra margin per customer per month.
A bit similar to this from a few years ago:
http://news.bbc.co.uk/1/hi/programmes/working_lunch/2963350.stm
Crap maths, 1.83+ VAT