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The Charity Tax Group has published a letter from HMRC confirming that most internet search browsing advertisements should be zero rated. It sets out the categories of internet search browsing advertisements that are eligible, stating that the only category not eligible for zero rating is location targeting. All advertising sent to a social media address that is a ‘personal account’, or where the recipient has paid a subscription for the site continues to standard rated.
HMRC had previously ruled that most digital advertising should be subject to VAT and had started to raise assessments to recover VAT from some advertising agencies. These costs were passed on to charities and amounted to millions of pounds of irrecoverable VAT. The Charity Tax Group has long argued that the VAT legislation in this area is no longer fit for purpose and welcomes this development.
