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Charities - VAT on social media advertising

Earlier this month, HMRC confirmed that the majority of digital advertising supplied to charities is zero rated for VAT. However, digital advertising targeted at individuals rather than the public remains liable to VAT at 20%.

Last updated: 21 September 2020

In this article, we comment on what this means for charities and their VAT accounting, and recommended actions for the future.

Background

After a long campaign by the Charity Tax Group, HRMC confirmed that no VAT is due on the majority of digital advertising when supplied to a charity, and Revenue and Customs Brief 13 (2020): VAT charity digital advertising relief was published earlier this month. This covers advertising in various scenarios and also confirmed that location targeting does not break the conditions for zero-rating.

To meet the conditions for zero rate VAT, the digital advertising must be communicated to the public. The general public does not include selected individuals or groups. These are people who are:

  • selected by individual home, business or email address, whether named or not;
  • individually named, or all those at the same address, such as family groups, or everyone in a particular building.

Targeted advertising 

HMRC’s view is that digital advertising on social media and subscription websites is ‘targeted’ at selected individuals or groups because providers use techniques such as tracking or the individual’s subscription to reach a specific audience to receive the advert. Where an advert is targeted in this way, it does not meet the conditions for the charity advertising relief, as it is not being communicated to the general public and is therefore a standard-rated marketing service.

That means UK suppliers of such digital adverting are required to charge VAT to charities. As social media suppliers are mainly based overseas, it also means that reverse charge VAT must be paid by charities receiving targeted advertising services from these suppliers, and in many cases this will represent a significant cost. (No reverse charge VAT is due on other digital advertising services received from overseas as these remain zero rated.)

What should you do?

Charities that receive social media or subscription based advertising services from UK suppliers should be prepared for suppliers to charge VAT. Charities that receive services from overseas suppliers, such as Facebook and Google, should be prepared and make the necessary provisions for reverse charge VAT, as HMRC can assess for reverse charge VAT due on targeted advertising paid for within the last four years. 

Revenue and Customs Brief 13 (2020) requires careful reading and interpretation before it can be applied to practical cases, so please get in touch with our VAT experts for advice on how to proceed in approaching your advertising agency on reimbursement of VAT already paid on other digital advertising under HMRC’s previous policy.

About the author

Linda Skilbeck

+44 (0)20 8037 3114
skilbeckl@buzzacott.co.uk
LinkedIn

Last updated: 21 September 2020

In this article, we comment on what this means for charities and their VAT accounting, and recommended actions for the future.

Background

After a long campaign by the Charity Tax Group, HRMC confirmed that no VAT is due on the majority of digital advertising when supplied to a charity, and Revenue and Customs Brief 13 (2020): VAT charity digital advertising relief was published earlier this month. This covers advertising in various scenarios and also confirmed that location targeting does not break the conditions for zero-rating.

To meet the conditions for zero rate VAT, the digital advertising must be communicated to the public. The general public does not include selected individuals or groups. These are people who are:

  • selected by individual home, business or email address, whether named or not;
  • individually named, or all those at the same address, such as family groups, or everyone in a particular building.

Targeted advertising 

HMRC’s view is that digital advertising on social media and subscription websites is ‘targeted’ at selected individuals or groups because providers use techniques such as tracking or the individual’s subscription to reach a specific audience to receive the advert. Where an advert is targeted in this way, it does not meet the conditions for the charity advertising relief, as it is not being communicated to the general public and is therefore a standard-rated marketing service.

That means UK suppliers of such digital adverting are required to charge VAT to charities. As social media suppliers are mainly based overseas, it also means that reverse charge VAT must be paid by charities receiving targeted advertising services from these suppliers, and in many cases this will represent a significant cost. (No reverse charge VAT is due on other digital advertising services received from overseas as these remain zero rated.)

What should you do?

Charities that receive social media or subscription based advertising services from UK suppliers should be prepared for suppliers to charge VAT. Charities that receive services from overseas suppliers, such as Facebook and Google, should be prepared and make the necessary provisions for reverse charge VAT, as HMRC can assess for reverse charge VAT due on targeted advertising paid for within the last four years. 

Revenue and Customs Brief 13 (2020) requires careful reading and interpretation before it can be applied to practical cases, so please get in touch with our VAT experts for advice on how to proceed in approaching your advertising agency on reimbursement of VAT already paid on other digital advertising under HMRC’s previous policy.

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