VAT for affiliate marketeers

I regularly receive enquiries from affiliates who are confused as to how VAT affects their business. In particular they need to know what has to be taken into account when looking at whether or not they need to be VAT registered.

The VAT rules as they apply to UK affiliate marketeers are quite complicated and not only do you have to split your commission income into several types, you also need to keep track of costs of services supplied to you from businesses located outside the UK.

As of 1 January 2010 (for VAT purposes only), the vast majority of services are deemed to be received where the customer belongs and the customer has to account for the VAT.
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Adwords, Microsoft Adcenter, Facebook And VAT Registration

Do you need to register for VAT?

To find out whether you need to be VAT registered you need to calculate your VATable supplies each month and compare the total for the last 12 months with the VAT registration threshold.

For this calculation, non UK advertising expenditure such as Google Adwords, Facebook and Microsoft Adcenter should be added onto your turnover in working out your VATable supplies.

This is because, for VAT purposes, advertising from non UK suppliers comes under the Reverse Charge rules, and VAT is accounted for by the recipient of the services (i.e. the customer) in their VAT return.

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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 HMRC is calculated as a percentage of gross sales. Gross sales are net sales + the VAT charged to the networks.
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Flat rate VAT scheme

Is the VAT flat rate scheme right for you?
Whether or not the VAT flat rate scheme is beneficial for you would depend upon the administration costs saving due to its simplicity weighed against the fact that in most circumstances, input VAT cannot be reclaimed.

Use our handy calculator

We have created a handy calculator for you to quickly calculate whether you would be better off joining the scheme. Some businesses, in particular those with exempt supplies, may be worse off under the scheme.
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