21st September 2020

HMRC recently published a brief clarifying its policy on VAT and digital advertising services purchased by charities. The brief expands on what different types of digital and electronically delivered advertising for charities can be zero-rated.

The guidance reiterates HMRC’s established view that where advertising is aimed at general audiences, rather than at individuals, this can be seen as eligible for the zero rate – subject to all other conditions being met.

However, if the audience is targeted individually, this will be subject to the standard rate of VAT (20%); this includes any method of contact, including electronically (such as via email or social media). The brief gives a helpful summary of the various types of charity advertising that will qualify for zero-rating, and those that HMRC consider should be subject to VAT at 20%.

HMRC has stated that it will continue to engage with stakeholders to ensure it understands the VAT treatment of changing advertising practices.

The full guidance and list of items eligible for the zero rate, as well as those being standard rated, can be viewed here.

Mark Hetherington, VAT Partner at UNW, said: “This is a welcome brief as it provides better clarity for charities on the scope of zero rating for advertisements delivered electronically. If a charity thinks they have been overcharged VAT, their first port of call should be with the supplier involved.

“Where advertising has been provided by an overseas-based business, for example Google Ireland, the charity should also review how they have dealt with any UK VAT on the imported service, normally by the way of a Reverse Charge.

“The brief will help make clear if any UK VAT charge can be reduced and a repayment obtained from HMRC.”

If you would like further guidance on this topic, please do not hesitate to contact one of our dedicated VAT specialists: Mark Hetherington, VAT Partner, on 0191 243 6073 or at markhetherington@unw.co.uk; or Ian Coulthard, VAT Senior Manager, on 0191 243 6017 or at iancoulthard@unw.co.uk.

You can also contact our charity specialists: Anne Hallowell, Charity and Not-for-Profit Partner on 0191 243 6237 or at annehallowell@unw.co.uk; or Francesca Leslie, Audit Manager, on 0191 243 6005 or at francescaleslie@unw.co.uk.

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