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VAT and Digital Marketing

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Sarah Baron - Menzies Accountant

Sarah Barron – VAT Senior Manager

Charities should be aware of potential VAT charges from their advertising suppliers.

Generally, charities are able to benefit from zero rating on supplies to them of advertising services. As always with VAT reliefs though, the detailed definition of what can qualify must be carefully checked to avoid unexpected VAT bills.

VAT and Digital Marketing

One such area is digital marketing. The legislation didn’t anticipate the advent of social media and therefore does not specifically address the way in which many charities now get their message out to the public. The legislation mentions that targeting a selected potential donor is not considered to be advertising, however in referring to selection of targets, this has thrown doubt on whether any digital marketing by way of social media can qualify for zero rating.

What is HMRC’s view on digital marketing VAT?

It is understood that HMRC are of the view that any such advertising is selected, by way of the social media platform targeting content towards those who have shown interest in particular topics previously. Agencies providing services in respect of digital advertising have been put on notice that HMRC are looking into the matter and considering raising VAT assessments. As most terms of business will allow an agency to issue a VAT invoice to their customer to correct an undercharge, charities should be aware that they may receive VAT invoices, to cover all such services received in a four year period and also be charged VAT on all services going forward.

What is the impact to charities?

If invoices are issued, this will be at the cost of the charity. Those which are VAT registered are unlikely to be entitled to recover the VAT on such costs. Those which are not VAT registered will still be required to pay their supplier the VAT. 

Charities using the services of overseas agencies should be aware that if the services are standard rated, they need to pay for the VAT on the service, by way of a reverse charge.

Any eligible body with concerns should contact their normal Menzies adviser to discuss how this may affect them. Alternatively, please contact Sarah Barron on +44 (0)1489 566298.

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