Taking the kink out of the sponsored link
Charities that use sponsored link or Pay Per Click (PPC) advertising have finally secured a concession from HMRC that these links not only qualify for zero-rate VAT relief, but any VAT paid over the last four years can be reclaimed.
Lorraine Owens of accountants Haysmacintyre urges charities to act quickly so that the claims do not go out of time. She explains:
‘Sponsored links appear above or beside the ‘natural’ search hits and advertisers are charged for every click on the link. Charities benefit from zero-rate relief for advertising on third party websites but not for their own websites. Sponsored links appear on Google’s website and usually include specially written advertising copy.
‘HMRC’s policy has been that such a link was not really advertising at all, it was just a doorway to your website and has, until now, denied zero rate relief as a result. This change of policy means that your charity is now able to zero-rate all costs to the search engines for PPC charges along with all the associated costs of production of the adverts. HMRC will accept claims for repayment of VAT paid for the last four years; you should also claim for compound interest.
‘Look at any costs made by your Search Engine Optimisation supplier which may actually be for production of the PPC advert. Although SEO work is excluded from zero rating, many SEO providers do also provide other services.
‘There is a further kink to be aware of. One of the most popular search engines for PPC is Google. The search engine invoices its customers from Dublin and does not include VAT on invoices to their customers. If your charity is VAT registered, you might, instead, have accounted for VAT under the reverse charge mechanism and paid the VAT to HMRC through your own VAT return. Many charities have been unaware of this and may not have accounted for VAT on this service. But some have done so and it is now clear that they should not have.’
Owens explains that there are two possible mechanisms for reclaiming VAT on PPC advertising:
- Supplier Included VAT on the invoice to your charity – You must write to your supplier and seek credit notes on all invoices you have been issued within the last four years.
- Your charity accounted for VAT under the reverse charge mechanism – You must write to HMRC and seek a refund of the VAT you accounted for in the last four years.
In either case you or your supplier should request payment of official interest on a compounded basis.
www.haysmacintyre.com/publications/PPC-Advertising.aspx
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