Remember to claim back VAT on your advertising

This tax relief is often forgotten, says Helen Elliott of Sayer Vincent

Helen Elliot, partner
Helen Elliot, partner

One charity tax relief that is often forgotten about is VAT zero-rating relief on the design and display of advertisements. The relief is available to all charities - they don't have to be VAT-registered to benefit. The supplier zero-rates their invoice so that even if the charity is unregistered it can still save money.

The relief covers adverts on any subject, including staff recruitment, events and campaigns, in all types of media, including newspapers, magazines, billboards, TV, radio and the internet. The advert must be in someone else's media, so adverts in a charity's own magazine or on its own website do not qualify. The advert must also be a medium of communication with the public. This precludes adverts targeted at selected individuals or addresses, such as direct marketing campaigns. However, adverts placed in trade magazines or on special interest websites do qualify.

If an advert qualifies for zero-rating, then design or production services for the advert also qualify, as do supplies of goods closely related to such services. Design and production services and closely related goods can also be zero-rated if the advert will be placed in donated space, and if the advert would have qualified but was not used. However, if the charity creates the advert itself, supplies used in the creation of the advert do not qualify.

The supplier must provide a declaration that its goods or services qualify for zero-rating. HM Revenue & Customs provides a model in its VAT Notice 701/58, which the charity can give to the supplier, but it is not always necessary to do this. If suppliers mistakenly standard-rate a qualifying service, they should be asked to provide a VAT-only credit note. If they refuse, contact the HMRC's charities helpline.

Goods that the charity sells, such as greetings cards and articles of clothing, cannot be zero-rated under this relief even if they contain adverts for the charity. Where a charity purchases advertising material that will be used in-house and in purchased or donated space, the VAT must be apportioned between zero and standard-rated.

For example, where a charity commissions the design and production of a set of posters, some of which will be placed in the charity's own premises and others in third party space, the VAT liability must be split, based on an estimate of how the posters will be used.

So make sure your charity always obtains the zero-rating it is entitled to, and go back to ask suppliers to correct any mistakes and refund you the VAT. Even at 15 per cent, it is expensive.

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