Flat Rate VAT For Affiliate Marketing
Using the UK flat rate VAT scheme is quite often beneficial for affiliate marketeers. Many in the affiliate marketing sector have low overheads and in particular small amounts of input tax (VAT charged on purchases).
Under the flat rate scheme, input tax is not reclaimable and the VAT paid to HMCE is calculated as a percentage of gross sales. Gross sales are net sales + the VAT charged to the networks.
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Adwords And Your VAT Return
Do you need to register for VAT?
To decide whether you need to be VAT registered you need to calculate your VATable supplies. For this purpose Adwords expenditure should be added onto your turnover in calculating whether you reach or exceed the threshold for registration.
The current registration threshold is £67,000 for the preceeding 12 months (threshold changed 1 April 2008).
Adsense income and non UK/EC income (eg US, Gibraltar etc commissions) are excluded from this calculation as they are “out of the scope of UK VAT”.
The rest of this article assumes that you are VAT registered. If you have met the threshold or wish to voluntarily register for VAT, we at HRBS would be pleased to help you. For a fixed fee quotation please click here.
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VAT for affiliate marketeers
I have many enquiries from affiliates who are confused as to how VAT affects their business. In particular the confusion about Adsense and Adwords. I have posted much of this information on the excellent a4uforum , but summarise it here.
VAT registration
The registration threshold is £67,000 (effective 1 April 2008) of taxable turnover for the preceeding 12 months. For VAT registration purposes, Adwords expenditure should be added onto your other turnover in calculating your taxable turnover and whether you should be VAT registered.
For example if your Adwords spend is £27,000 and commission income (from UK networks) is £40,000 then you must register for VAT.
