HMRC has recently provided greater clarification on the rules surrounding charitable online advertising and the ability to benefit from VAT zero rating.
To date, HMRC has accepted that advertising intended to reach the general public is eligible for zero-rating; however, any advertising that is specifically targeted towards an individual is not. In recent years this has become more of an issue as online advertising in particular has become more sophisticated, adopting targeting methodologies that utilise online behaviours and demographics.
HMRC has now accepted that online advertising utilising these techniques will qualify for VAT zero rating.
A summary of the techniques is detailed below.
If you require more information there is a full briefing document available here or contact myself, Stewart Henry*. I will be happy to help.
Online advertising techniques now eligible for VAT zero rating
Retargeting – a user is tracked using cookies and those cookies are used to find that individual again.
Behavioural targeting – cookies are used to identify people who have expressed an interest in a relevant area.
Demographic targeting – data is collated from a number of different sources. This can be logged data, such as DOB information taken from email providers and also behavioural data.
Audience targeting – the use of demographic and behavioural data alongside data from additional sources.
Lookalike targeting – similar to audience targeting, cookies are used to assess common behaviours of existing users or donators. The advertiser then looks for more people who fit the group.
* Stewart Henry is a Partner at VAT specialist firm Constable VAT Consultancy. Due to the highly complex nature of VAT we utilise the services of an external firm to ensure we are providing best advice to our clients.