HM Revenue and Customs Brief 25/10
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Issued 7 June 2010
VAT: pay-per-click charity advertisements
This Revenue & Customs Brief explains our revised policy on the VAT treatment
of pay-per-click (PPC) charity advertising on sponsored links and other
associated services.
Background
PPC is used by organisations on search engines such as Google to encourage
searchers to click on the organisation’s link in priority to any other links on
the results page following a search. The organisation pays the search engine
provider an agreed amount each time their website is accessed through the
sponsored link.
Supplies of advertisements for charities, when placed on a third party’s
website, and their design and production costs, attract the zero-rate of VAT
under Schedule 8, Group 15, Item 8 and 8A - 8C of VAT Act 1994.
We have until now taken the view that a PPC-sponsored link is not an
advertisement itself but simply a means of access to the charity’s website. As
such, we considered the costs of providing PPC were excluded from zero-rating by
Note 10B to Group 15, Schedule 8 which excludes zero-rating on the costs of
providing a charity’s website.
Following representations from charities that zero-rating should apply to PPC
charity advertisements, we have reviewed our approach and concluded we should
revise the VAT treatment of PPC advertising supplied to charities.
Revised policy
We now accept that PPC-sponsored links appearing on search engine websites
are advertisements for the purpose of Item 8 and 8A, and qualify for zero-rating
when supplied to a charity. It follows that the supply of copyright and design
services associated with such sponsored links fall within the zero-rating.
However, we still maintain that services supplied by copywriters and
designers for the purpose of search engine optimisation (structuring a website
so that it contains as many keywords as possible) do not qualify for relief. We
consider that these services entail the optimisation of the charity’s own
website, and so are specifically excluded from Item 8 by Note 10B to Group 15.
The listing of a charity in the results of a search engine (‘natural hits’)
does not constitute the promulgation of an advertisement for the purpose of Item
8 since the charity’s name appears automatically, regardless of any action taken
by or on behalf of a charity, and merely highlights text from the charity’s own
website.
Making claims or adjustments
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 will be subject to a transitional four year limitation
period and ‘unjust enrichment’ provisions. Guidance on how to make claims is
contained in VAT Notice 700/45 'How to correct VAT errors or make adjustments or
claims'.
Further information
Detailed guidance on charity advertising can be found in VAT Notice 701/58
'Charity advertising and goods connected with collecting donations’.
If you are in any doubt about the correct treatment please contact the
Charities Helpline on 0845 302 0203.
About the Author
© Crown Copyright 2010.
A licence is needed to reproduce this article and has been republished for
educational / informational purposes only. Article reproduced by permission of
HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are
updated regularly and may be out of date at time of reading.
