HMRC revise policy on VAT and ‘pay-per-click’ advertising

HM Revenue & Customs have announced that ‘pay-per-click' advertising services to charities will now be ‘zero-rated' for VAT purposes. ‘Pay-per-click' is a term to describe a form of advertising on internet search engines such as Google or Bing which encourages searchers to click on the organisation's link, which will appear often at the top of the search engine page as a ‘sponsored link'. The organisation effectively pays the service provider a fee for each time a person clicks on their link.

This type of advertising was used heavily by the Conservative party in last month's general election where the party had a very high profile pay-per-click link on the popular website You Tube.

HMRC had previously not considered a pay-per-click sponsored link as an advertisement, and therefore held that it fell outside the VAT relief applicable to other forms of on-line advertising. Following representations by charities and their representatives, such as the Charity Tax Group, HMRC have relented.

Services supplied by copywriters and designers for the purposes of ‘search engine optimisation' (structuring a website so that it comes up high in the list of a search engine search results) still do not qualify for VAT relief.

Businesses that have accounted for and paid VAT on supplies of pay-per-click sponsored links may submit claims for overpaid tax.

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