It has been confirmed that charities cannot claim VAT relief on social media advertising after HM Revenue & Customs (HMRC) issued a new briefing notice to financial controllers.

The letter – published online – clarifies the regulator’s position on the charging of VAT on physical and digital advertising media, the treatment of which had previously stood in a grey area.

So, where does the confusion lie?

Some advertising services, when supplied to a charity, may be zero rated for VAT purposes – providing the advertising is communicated to the ‘public’ and the charity provides suitable declaration to the supplier. This is where it can get a little bit complicated.

The public, as described in accordance with VAT legislation, is defined as the “general public”. This can also include businesses and small groups – such as a magazine or newspaper audience or people targeted by a general campaign in their geographical area.

However, the ‘public’ does not include targeted or specially selected individuals or groups. And this is – generally – where the target audience of a social media campaign lies.

This is because when customising your ad campaign on a social media platform, you must select who you wish to target by demographic, such as age, interest, location, profession or even relationship status.

So, what does this mean?

Simply, charities cannot claim VAT relief on social media advertising.

If you believe that your charity has claimed VAT relief on social media advertising in the last four years, you should make representations to have the error rectified. Going forward, you should ensure that your accounting processes are adjusted to stay compliant.

For help and advice, please get in touch with our expert team.

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About our Charities team

About our Charities team

With Mark Sharpley, UK200Group specialist legal sector member, and fellow partners Steve Bramall and Luke Taylor at the helm of an experienced team of charity finance specialists, Smailes Goldie is well positioned to offer advice to the charity and not-for-profit sector. We understand that charities are now facing a more challenging environment than ever before, so it is essential to have a team of accountants who understand the fast changing nature of this sector, which has more regulatory and compliance requirements than most. If you feel that you need advice on any of the issues discussed in this e-bulletin, Smailes Goldie are here to help.

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