New Opportunity for zero rating on “pay per click” advertising for charities

On 7 June 2010, HMRC issued Revenue & Customs Brief 25/10, in which it announced that its policy on zero-rating for advertising supplies to charities would from herein be revised to extend to certain internet-based ‘pay per click’ (‘ppc’) advertising.
Many charities pay search engine websites such as Google a ‘per click’ fee to encourage web surfers to click on the organisation’s link in priority to any other links on the results page. HMRC’s policy had been that although adverts for charities placed on third party websites attracted zero rating, ppc advertising did not. However, following representations from a number of charities and their advisers, HMRC has revised its policy.

Ppc links appearing on a search engine website will now qualify for zero rating when supplied to a charity.

Whilst this policy revision may not go as far as charities might have hoped, it will certainly be welcomed and charities will be keen to encourage suppliers to obtain and pass on refunds of VAT overpaid to HMRC. Charities should ensure that they obtain refunds of VAT overpaid to HMRC by suppliers or via the UK reverse charge.
Should you wish to discuss this or any other VAT matter, please do not hesitate to contact us.

Elysian Associates
June 2010