Zero rated VAT for charity advertising
Are you involved with a charity that spends money on advertising?
Did you know that the advertising can usually qualify for zero rated VAT?
Many advertisers aren’t aware of this and even those that are don’t always actively promote it so you may need to raise it with your supplier and ask them to apply VAT at the zero rate.
What does zero rated VAT for advertising mean?
This means that instead of paying £120 you will only need to pay £100, saving money that can be better used to support your beneficiaries.
What sort of advertising is included?
The zero rating applies to all types of advertisements on any subject, including staff recruitment. The name or logo of the charity does not need to be included for relief to be allowed. The advertising can be on any medium which communicates with the public including television, cinema, billboards, the sides of vehicles, newspapers, other websites (not the charity’s own) and printed publications as well as space on other items such as beer mats, calendars, the reverse of till rolls and clothing.
The zero rating includes services such as design and preparation costs for artwork and typesetting that are closely linked to the production of a qualifying advert. The design and preparation costs do not need to be included in the same invoice as the advertising itself.
It is important to be aware that the relief does not include a supply used to create or contribute to the charity’s own website.
Who should the advert be aimed at?
The advert needs to be for the general public. This can be interpreted widely to include groups such as readers of a trade or religious magazine and people in particular parts of the country who may be targeted by a general poster campaign in their area.
However it does not include selected individuals or groups such. Examples of selected individuals or groups include people who have been selected by individual home, business or email address whether named or not, individually named people and all those at the same address such as family groups or everyone in a particular building.
Direct mail and telesales are not part of the relief because they’re not a supply of advertising time or space but are marketing and advertising addressed to selected individuals or groups.
What about social media and digital advertising?
There are specific rules for this type of advertising because although adverts supplied by digital methods have the potential to fall within the zero rate, digital advertising services include a level of selection that can make it difficult to determine if the zero rate can apply.
There are more details available via HMRC and the Charity Tax Group.
Is it just for charities or can all not for profits benefit?
This relief only applies to charities.
What if I have paid VAT on advertising in the past?
If you have paid for advertising in the past with 20% VAT you should approach your supplier and ask them to credit note those invoices and reinvoice at the zero rate and then refund the difference to you. This can result in a substantial cash inflow for your charity.
Does advertising supplied to a trading subsidiary of a charity qualify for zero rating?
No, supplies made to a trading subsidiary of a charity are not included. Although there is a good chance that your trading subsidiary will be VAT registered and able to reclaim the VAT anyway.
My charity is not VAT registered, do we still qualify?
Yes. The relief is available to charities whether or not they are registered for VAT.
How do we get the relief?
You don’t need to contact HMRC or claim any refunds from HMRC. Your supplier should apply the zero rating in their invoice to you. The charity will need to give the supplier a declaration in a suitable format. HMRC provide a sample declaration (copied below) which should be retained by the supplier along with any notes on steps the supplier has taken to verify the declared details.
It’s not uncommon for suppliers to be unaware of the zero rating for charities so you may need to bring it to their attention.
Sample declaration:
Charity advertising request for zero rating
Part 1 is to be completed by the charity.
(tick as appropriate)
(*delete as appropriate)
I ………………………………………. (full name)
………………………………………… (status in organisation)
of ……………………………………… (name and address of organisation) ………………………………………… …………………………………………
Declare that the above named charity is *buying from/importing from:
…………………………………………………………. (name and address of supplier)
……………………………………………………………
The following which *is/are eligible for relief from VAT under item
8 or 8A
8B or 8C
of zero rate group 15
or qualify as
printed appeal letters
printed envelopes for use with appeal letters
printed monetary donation collecting envelopes
monetary donation collecting boxes
lapel stickers or badges or component parts
………………………………………………………… (signature and date)
Note: it’s the supplier’s responsibility to ensure that the goods or services supplied are eligible before zero rating them.
Part 2 is to be completed by the supplier.
I have read the guidance in VAT Notice 701/58: charity advertising and goods connected with collecting donations and agree that the goods and services described come within the category shown.
Signature and date ………………………………………………………
Where can I find out more?
The Charity Tax Group is an excellent resource and you can also check out HMRC’s guidance.
If you are looking for support with managing your charity’s finances then feel free to get in touch for a chat. We support a number of charities with their bookkeeping, payroll and year end accounts and as their outsourced Finance Director.