HMRC has conceded that zero-rating VAT should apply to pay-per-click (PPC) charity advertisements, but will not budge on tax for search engine optimisation.

Although a charity advertisement placed on a third-party website attracts zero-rate relief, HMRC had taken the view that a PPC-sponsored link was not an advert itself but a means of access to the charity’s website, and excluded it from zero-rating.

But after lobbying from the charity sector, HMRC has conceded that PPC-sponsored links on search engine websites are adverts and qualify for zero-rating when supplied to a charity. Also, the supply of copyright and design services associated with such sponsored links will now fall within zero-rating.

However, HMRC still maintains that services supplied by copywriters and designers for the purpose of search engine optimisation, ie structuring a website so that it contains as many keywords as possible, do not qualify for relief. HMRC considers that these services entail the optimisation of the charity’s own website, and so are specifically excluded.