It has been confirmed that charities cannot recover VAT on social media advertising after HM Revenue & Customs (HMRC) issued a 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, maybe zero rated for VAT purposes – providing the advertising is communicated to the ‘public’. 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.
In light of this, charities cannot claim VAT relief on social media advertising.
If you believe that your charity has attempted to recover VAT 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 team.