Charities could save millions of pounds under changes to VAT rules on digital advertising, according to the Charity Tax Group (CTG).
CTG told Civil Society News that the changes could allow charities to save substantial sums in costs associated with online advertising, although the full value will only be known when organisations start to reclaim funds under the new rules.
Tax rules change
The majority of digital advertising is subject to VAT under existing rules. CTG said that these costs were “being passed on to charities” when HM Revenue and Customs pursued advertising agencies for VAT payment.
CTG said in a statement that HMRC “now accepts that VAT is no longer considered due on the majority of internet search browsing advertisements”. It will still be charged on targeted advertising by email and on social media.
In a letter confirming these changes, HMRC added that online advertising “is a complex and constantly changing market, and advertising legislation has not always kept up with it”.
The government plans a broader review of advertising regulations in the near future, with VAT rules on digital advertising likely to be included in that review.
Changes 'will help charities achieve more'
Richard Bray, vice-chair of CTG, 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, said: “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.”