Adwords, Microsoft Adcenter 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 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.

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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 £68,000 (effective 1 April 2009) 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 £28,000 and commission income (from UK networks) is £40,000 then you must register for VAT.

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