When is a good not a good?

You may think it obvious what goods are and most of the time it is. However, maybe now is the time to think hard about the distinction between goods and services. The latest UK government white paper – The Future Relationship between the United Kingdom and the European Union – states: “The UK proposes the establishment of a free trade area for goods, including agri-food.” The white paper goes on to define goods as, “…physical products that tangibly cross a border.”

To take an interesting example, is software goods or services? Suppose you write a program for somebody, download it onto a disk and send it to them by post. It physically crosses the border doesn’t it, so it must be goods?

Or is it?

The Sale of Goods Act of 1979 helpfully defines goods as: “Goods includes all personal chattels other than things in action and money, and in Scotland all corporeal moveables except money; and in particular goods includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale and includes an undivided share in goods.” I leave you to look up the definitions of personal chattels, corporeal moveables and emblements!

A recent case went to the Court of Appeal where it was ruled that software supplied as a download was not goods, but implied that software transferred by handing over a disk was.

For VAT purposes, HMRC tries a different tack usefully defining suppling services to be: “Something other than supplying goods.”! This has led to a number of clarifications, but it seems that standard software (such as an accounting package) is goods, whereas bespoke software is services, independent of the media on which they are supplied. The VAT treatment is different.

The Consumer Rights Act of 2015 goes one further and defines goods as follows: “Goods means any tangible moveable items, but that includes water, gas and electricity if and only if they are put up for supply in a limited volume or set quantity.” It solves the software issue altogether by defining a new class of things (neither goods nor services): “Digital content means data which are produced and supplied in digital form.”

But the government white paper does not mention digital content…

So there you have it, and that’s only how the UK sees it!