This is a rough guide to VAT and printing – it is complicated!
Zero rated material: in the UK the government has sought to protect reading materials from bearing VAT . This means that books, magazines and newspapers are all zero rated. By extension, booklets, newsletters and leaflets amongst common items of printed material are also zero rated.
Standard rated items: all items of stationery (letterheads, business cards, compliment slips, invoices etc), forms, any leaflet which has space designed for more than 25% manuscript addition (e.g. a form to fill in and return), postcards, posters – all these bear VAT at the standard rate, currently 20%.
a. Artwork, design and typesetting: if this is provided as a stand alone service then VAT is charged. If it is part of a job that would otherwise be zero rated, for example the design and typesetting of a book then if the same company is doing both jobs then the whole job would be zero rated.
b. Finishing: a finishing operation carries VAT if it is chargeable on the completed item, for example scoring and folding greetings cards. If the item being worked upon becomes part of a zero rated item, for example scoring or laminating a book cover, then the operation is zero rated. However, there are exceptions: one of our major customers produced language teaching materials which would normally have been zero rated, but because they were laminated to make them more durable they became standard rated.
Registered charities can claim exemption on some items that would be standard rated in some circumstances. These relate to specific fund-raising activities and do not include normal items of stationery like letterheads. There is a 38pp document on the HM Revenue & Customs website outlining the law on VAT and charities.
The principle of VAT is that it is a tax on Added Value. As a manufacturer we buy a raw material (paper for example) for x£ + 20% VAT. We then add value to that raw material by printing on it and sell it to our customer for x + y£ + 20% VAT where y is the cost of production plus our profit. At the end of each quarter we take the difference between what we have paid out in VAT for raw materials and overheads, and what we have charged our customers and give the balance to HM Revenue & Customs.
NB – the above is my understanding of the regulations relating to VAT and should not be construed as a definitive statement.