Being called to account: tax considerations for UK-based collectively-funded open access publishers

"That’s a pretty specific title, I suspect, but as I am learning with the Open Library of Humanities, we’re in uncharted territory, a place where the specifics matter. This post should not be considered legal or accounting advice. I’m not qualified to give it. I post this as a series of matters that we are working through, with advice from our accountants, in case anyone else is trying a similar enterprise and wants to know what the landscape looks like. As a brief background: The Open Library of Humanities (OLH) is a gold open access, peer-reviewed, internationally-supported, academic-led, not-for-profit, mega-journal, multi-journal and books platform for the humanities. It is funded by an international library consortium and so has no author-facing charges ... All well and good. Now, here’s where it gets complicated and we begin to delve into tax law. We are a not-for-profit entity: a UK company limited by guarantee. We work with a technological supplier who must charge us VAT on supplies. We have 'agents' in countries abroad who act as billing intermediaries. In short: we want to take money from libraries worldwide and make the products of the labour for which they pay available to everyone.  Let’s consider what this looks like in a couple of different scenarios. If we were a traditional publisher, where you, as a UK library, were paying us for the 'direct and immediate' supply of a product to your collection, we would charge you VAT at a rate of 20%. We would, in addition, be able to claim back VAT on our expenditure to our supplier. The same applies to open-access publishing done through Article Processing Charges (APCs). If we were a for-profit academic publisher in this same environment, we would have to pay UK corporation tax.  But we are not like that. We are neither for-profit, nor, potentially, are we selling something back exclusively to participating libraries as a 'direct and immediate' benefit. After all, everyone gets access. There is potential, therefore, for our activities to be classified as 'non-business' activities. This means that we would not need to charge UK- and EU- based customers VAT. By contrast, though, it also means that we could not claim back VAT on our expenditure. If we didn’t raise prices, therefore, this would entail a 20% hit to our revenue vs expenditure.  There is a further VAT complication, apparently. If, as an entity, we are contracting services from providers outside the UK (like a billing agent) that would be VATable in the UK, and this pushes us over the VAT threshold, then that expenditure may count as though it should be VATable. Yes, you read that right. We might have to pay VAT on something we were purchasing as though we’d received it as income. This is supposed to be in order to equalize competition between UK and external corporate entities. In reality, nobody in the UK can provide the specific services we need and it could prove to be a VAT headache ..."