The charity sector is set to reap in major savings on digital advertising with the introduction of new VAT rules, which should see costs tumble.
The majority of digital advertising is subject to VAT under existing rules, but the Charity Tax Group (CTG) has long argued that these costs were being passed on to charities when HMRC pursued ad agencies for VAT payment.
But following a protracted campaign, HMRC now accepts that VAT is no longer considered due on the majority of Internet search ads although it will still be charged on targeted advertising by email and on social media.
CTG told Civil Society News that the changes could allow charities to save substantial sums but it could not put a figure on the amount. HMRC maintained that online advertising “is a complex and constantly changing market, and advertising legislation has not always kept up with it”.
CTGR vice-chair Richard Bray said: “This development is good news for charities. It will result in significant VAT savings on the cost of many forms of digital advertising at a time when they need financial help the most. We are so pleased that CTG’s persistence in its discussions with HMRC have achieved such a positive result.”
Andrea Marshall, a tax specialist at the British Universities Finance Directors Group, added: “This is a big step forward which provides clarity on the VAT treatment of an increasingly important communication channel and will undoubtedly help charities to achieve more in these straitened times.
“This has been achieved through the Charity Tax Group’s patient and collaborative approach to resolving this matter with HMRC.”
Related stories
Charity agency Bluefrog Ltd goes bust over £2m VAT bill
HMRC rocks industry with direct mail VAT bombshell
VAT rules agreed, but with a snag
VAT timebomb starts ticking again
DMA defuses VAT mail timebomb
