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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.


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.

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Article Published/Sorted/Amended on Scopulus 2010-06-18 15:21:13 in Tax Articles

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