VAT – Changes to charity PPC advertising
HMRC have revised their policy on the VAT treatment of pay-per-click (PPC) charity adverts. HMRC now accept that PPC-sponsored links appearing on search engine websites qualify for zero-rating when supplied to a charity. HMRC also accepts that the associated supply of copyright and design services can be zero-rated.
This is an important change that should assist many charities that raise funds using the internet, for example by using a search engine to encourage users to click on a certain charity’s link in priority to any other links on the results page following a search. Following this change in policy, these costs will be zero-rated.
Any businesses that have accounted for and paid VAT on supplies of charity advertisements that are now considered to be zero-rated may submit claims for overpaid tax. These claims will be subject to the usual rules. Whilst it is the business supplying the advertising that must make any claim to HMRC, it is expected that many charities will benefit depending on the contractual and business relationship between the charity and its supplier.
It should be noted that HMRC still do not accept that services supplied by copywriters and designers for the purpose of search engine optimisation can be zero-rated. HMRC consider that these services are specifically excluded from the charity zero-rating provisions.