What digital advertising is included in the charity VAT relief?

Following recent representation by the Charity Tax Group (CTG) on behalf of the charitable sector, HMRC have consulted with various parties and announced an update to their policy in the area of online charity advertising.

In general, the placing of an advertisement by a charity can usually qualify for VAT relief under the zero rate provisions. However, the marketing and advertising of material to targeted individuals or groups have always been specifically excluded from this relief; for example, emailing named individuals. Where advertising is ‘targeted’ then suppliers are required to charge charities at the standard rate of VAT, or, if the supplier is based outside of the UK the charity must self-charge VAT under the reverse charge mechanism.

In recent times, the developing area of social media marketing has caused conflict with HMRC who contended many social media campaigns, which are phrased as being targeted, are ‘targeted’ in the context of the legislative exclusion. This is on the basis the social media adverts can be directed to individuals or groups based their digital footprint (eg via cookies).

As a direct result of the CTG’s intervention, HMRC have now consulted with Department for Digital, Culture, Media and Sport (DCMS) to understand the marketplace and terminology used in more detail. HMRC have now revisited and summarised their position for social media campaigns as follows:

Can qualify for VAT relief

  • Re-targeting
  • Demographic targeting
  • Audience targeting
  • Lookalike targeting 

Does not qualify for VAT relief

  • Location targeting

Why is this important?

As a result of the previous position, many charities have either suffered VAT charged by suppliers or applied the reverse charge to services received from outside the UK. Charities with costs in this area should revisit their past VAT accounting and consider if they may be entitled to a rebate as a result of the ruling.

It is also recognised that social and digital medial remains an evolving landscape and HMRC have committed to keeping appraised of this area and the sector may still want to push for a widening of the legislation to ease future risk of misinterpretation. 

For further advice and assistance please contact Nick Sladden.

'RSM is a long-standing Observer Member of the Charity Tax Group. The Group makes representations to the government on charity taxation and over the last 35 years has saved good causes over £8 billion in tax.'