VAT on Internet advertising

This is something you may be interested in, as many businesses now place adverts on popular websites such as Google or Facebook. The advertising sold by Google (including 'adwords') is an international service for VAT purposes as it is sold to UK businesses by Google Ireland Ltd from Dublin. Facebook appear to invoice from their base in USA, so advertising on the Facebook site is also an international service for VAT purposes.

A UK business should not be charged VAT on the cost of the advertising in either case, as the cost is subject to the reverse charge regulations. This means, a UK VAT registered business must add VAT at the UK standard rate to the cost and add the gross cost to both purchases and sales for the period. The UK business pays the VAT due as if it had made the sale, and it also reclaims the VAT due on the purchase cost. The net effect for a VAT registered business should be zero, unless it makes VAT exempt sales. This is explained in the VAT notice 741A (see below).

The reverse charge mechanism applies whether the supplier is within the EU or the rest of the world (outside the UK), so the same treatment applies to invoices from Google Ireland Ltd and from Facebook. However, certain accounting software programmes need some special tweaks to cope with the reverse charge on purchases. Check that your system is processing the VAT on the internet advertising costs correctly.

If you have been charged Irish VAT at 21% on the Google advertising, this may be because Google Ireland Ltd has recorded the customer as being a private person not a business. Your client can reclaim this erroneously charged VAT from Google Ireland Ltd, but it cannot reclaim the VAT through the international VAT refunds service as the VAT should not have been charged in the first place. Make sure you do not include the Irish VAT on your UK VAT return as it is not correctly charged VAT

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