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HMRC widens its challenge on charity advertising VAT

Robert Warne, Partner, Head of VAT
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It now seems that HMRC is pursuing its challenge with more charities on digital advertising by providers such as Google and Facebook. However, we believe there are arguments to contest its approach.  

A summary of the challenge

  • HMRC consider such supplies of digital promotion via social media to be targeted marketing and not advertising because it is not a ‘communication to the public’.
  • As such suppliers are in the main based overseas, where the supply is of advertising, you are not required to apply the Reverse Charge mechanism, because the supply would be Zero Rated if made in the UK.
  • However, if HMRC's approach is correct, Reverse Charge VAT is due on marketing (a Standard Rated supply in the UK) and in many cases this would represent a significant cost.
  • We do not necessarily agree with HMRC's view, but it has so far not been challenged effectively.

HMRC is widening the net

  • A client of ours was recently sent this letter from HMRC.
  • It appears that HMRC have set up a task force to approach and challenge charities who are not applying their view.
  • One interesting comment in the letter is that HMRC recognise that a targeted campaign in a ‘trade magazine’ is accepted as an advertisement to the public. This seems to be the first time HMRC has differentiated between trade magazines as opposed to online campaigns.
  • We see little difference between digital and non-digital targeted campaigns and you could have strong arguments to challenge HMRC’s approach.
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What do I need to do now?

We would urge you to review your approach to such services received and seek advice, whether or not challenged by HMRC.

How we can help

For further information on how to correctly account for VAT please contact Robert Warne or Chris Dears.

Contact us

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