VAT and digital advertising – update from HMRC

The Charity Tax Group (CTG) has been engaged in a dialogue with HMRC concerning its policy relating to VAT on digital advertising, following reports of HMRC action to assess for VAT in cases which we did not regard as valid.

Following extensive discussions with a coalition of affected charities and universities, we commissioned an opinion from respected barrister Peter Mantle, which has been sent to HMRC. Despite our persuasive and diplomatic efforts, we have received a disappointing response with which we do not agree. However, this appears to be a reasonably ‘final’ HMRC view (although we would like to think that they might be willing to think again in due course, and we are considering what can best be done about that).

To ensure that you are aware of the overall HMRC stance, we provide below a verbatim quote from their most recent letter on the subject:

“We have identified four scenarios where advertising takes place online. We consider the VAT treatment to be as follows.

  • ‘Natural hits’ – not supplies of advertising for the purposes of item 8 – standard rated
  • Pay-per-click adverts – zero rated
  • Direct placements on third party websites – zero rated
  • Social media adverts – standard rated”

You will probably wish to consult your own advisers and media agencies as regards the actions you could take in respect of this information. We have no more information as to what each of the above descriptions specifically covers, which we acknowledge may not be easy to interpret.  However, we hope that the information that has been elicited from HMRC is helpful to you.

CTG does not regard this issue as closed.  Further consultation and consideration will be ongoing to seek a better outcome for the sector as a whole.”