New HMRC Policy on Electronic Advertising
Online Advertising – New HMRC Policy
Many charities make use of social media advertising, such as that provided by Facebook. These providers will often invoice from Ireland without any Irish VAT, and in such cases, the VAT will be the responsibility of the advertising purchaser under the reverse charge rules. Under these rules, if you purchase a service from abroad, you account for UK VAT, if due, on your VAT return.
In electronic advertising purchased by charities, this has not historically been an issue as HMRC has generally accepted that advertising provided to a charity is zero-rated and that no reverse charge VAT has been due. Unfortunately, over the last few years, they have changed their approach and now argue that such advertising is excluded from the charity advertising zero rate and subject to VAT. The HMRC reason for this is that the charity zero rate does not apply to adverts sent to selected individuals, an exclusion designed to exclude direct mail as the legislation is pre-internet. When you advertise on Facebook, you have to pre-select your audience – unless you want it to go to 2.7 billion people. You are likely to design your campaign, so your message is seen by a certain demographic in your area – based crucially on information that Facebook has about its users.
HMRC have sought to stop the zero rate applying to a wide range of electronic adverts. They have been expertly challenged on this by the Charity Tax Group and slightly pulled back, now accepting that geographically targeted adverts can be zero-rated if they appear when people browse the internet and are based on very general data fields, not because of personal information about the individual. They still hold to their view that social media adverts that individuals see because of information the social media company has about them – where they live, what they like etc, is taxable at the standard rate. HMRC have issued a new business brief that explains their policy. See
If you buy a service that HMRC believes should be subject to a reverse charge, you must account for the VAT upon it to avoid penalties. Whether this VAT will be recoverable will depend upon what the advert is aimed at achieving.
Let’s hope that HMRC eventually agrees to change their policy or the law to allow all social media adverts to be zero-rated. The tax must keep up with technology, and targeted adverts are now very much the norm.
If you have any questions on online advertising or any other VAT issues you want to chat through, please get in touch. I don’t charge for an initial chat. Contact me here.