[Archive] Changes to HMRC policy on ‘digital advertising’ following Charity Tax Group campaign will result in significant VAT savings for charities

*Update*: HMRC has now issued Revenue & Customs Brief 13 (2020): VAT charity digital advertising relief to confirm the views expressed in their letter to CTG dated 20 July 2020. However, there is one improvement over the letter, and the Brief supersedes it. The change is that HMRC now accepts that ‘Location Targeting’ is also within the zero rate.  As per the original letter, categories described as ‘social media’ and ‘subscription website’ advertising are regarded by HMRC as standard rated for VAT purposes.  But all other forms of digital advertising are zero rated.  The exact forms are described in the Brief, and the above is a basic summary.

HMRC has previously ruled that most digital advertising should be subject to VAT. HMRC had started to raise assessments to recover VAT from some advertising agencies. These costs were being passed on to charities and amount to millions of pounds of irrecoverable VAT.

For more than two years, the Charity Tax Group (CTG) have been challenging HMRC on this.  Despite a number of disappointing responses over this period persistence has finally paid off.

A letter received by CTG in July 2020, provides a welcome clarification of the HMRC view of the VAT position.

HMRC now accepts that VAT is no longer considered due on the majority of internet search browsing advertisements.  The letter sets out the categories of advertisements that fall into this category.

However, all advertising sent to a social media address that is a ‘personal account’, or where the recipient has paid a subscription for the site continues to be treated by HMRC as standard rated for VAT purposes.

The HMRC letter suggests that a review of the VAT legislation will be incorporated into a broader DCMS review on the future regulation of advertising.  CTG has long argued that the VAT legislation in this area is no longer fit for purpose and welcomes this development.

CTG recommends that charities seek advice from their professional VAT advisers on what the next steps are for them.

Richard Bray, CTG Vice-Chairman said:

“This development is good news for charities.  It will result in significant VAT savings on the cost of many forms of digital advertising at a time when they need financial help the most. We are so pleased that CTG’s persistence in its discussions with HMRC have achieved such a positive result”.

Andrea Marshall, Tax Specialist, British Universities Finance Directors Group (BUFDG) said:

“This is a big step forward which provides clarity on the VAT treatment of an increasingly important communication channel and will undoubtedly help charities to achieve more in these straitened times. This has been achieved through the Charity Tax Group’s patient and collaborative approach to resolving this matter with HMRC”.




Notes to editors

The Charity Tax Group (CTG) has over 800 members of all sizes representing all types of charitable activity. It was set up in 1982 to make representations to Government on charity taxation and it has since become the leading voice for the sector on this issue. CTG is an active participant in HMRC’s Charity Tax Forum and sits as the charity representative on HMRC’s Joint VAT Consultative Committee (JVCC).

If any third party wishes to quote passages from the letter on their website or in general bulletins, please would you attribute the letter and its contents to CTG, and refer in all cases to it as communications between CTG and HMRC.

Charities will want to contact their professional advisers to interpret the letter in the context of their own advertising procurement and contact their advertising agencies where appropriate. CTG is not able to comment on specific arrangements or the meaning of the letters for individual charities.

For more information or additional press comment, please contact the CTG Secretariat at [email protected] or 02072221265