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VAT is due on invoices from Google and Facebook

Robert Warne, VAT, Head of VAT
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The issue

We highlighted in May 2019 that HMRC is looking at the advertising services charities receive from suppliers such as Facebook and Google. HMRC has now interpreted these supplies to be standard rated supplies of target marketing.

Background – why is VAT due?

  • HMRC’s main argument is that the provision of services where suppliers such as Facebook/Google are able to select users by using their ’browsing history’ is not ‘advertising to the public’ (a key condition for treating a supply to a charity as advertising) and therefore zero rated. These supplies are not advertising, they are marketing services and therefore standard rated.
  • HMRC admit in its own published guidance that an element of ‘targeting’ can still be seen as advertising, for example an advertisement in a trade magazine only available to members of that particular trade body. However, these go beyond what they deem ’an element’.
  • There is a perception that HMRC perhaps do not fully understand the technical provision by Facebook and similar providers, and therefore cannot make a judgement as to the extent of targeting and, in contrast, what can still represent advertising.
  • As most of the suppliers are based overseas, it is the responsibility of the charity to account for Reverse Charge VAT if this is seen as a marketing supply; the Reverse Charge due on advertising services received from overseas is of course zero rated, whereas the Reverse Charge due on marketing services is standard rated.

What’s happening?

HMRC has not published proper clarification on its position and is still discussing matters with Charity Tax Group.  However, visiting officers from HMRC are insisting that this matter is a ‘done deal’ and assessments are being issued.

Where will this go?

A Court decision would hopefully assist in clarifying matters but there does not appear to be any such cases on the horizon. We will of course be keeping everyone informed of any progress on this issue, but at the moment it appears that HMRC are not going to change their position; charities who receive these services should be prepared and make the necessary provisions, as HMRC can go back four years.

If you wish to discuss this further please do not hesitate to contact Robert Warne.

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services