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.

The purpose of the Reverse Charge is to put you, as a VAT registered business, in the same position as if you had received the supply from a UK supplier rather than from one outside the UK. You are therefore treated as both the supplier and customer for UK VAT purposes (for VAT only, not income or corporation tax).

How much is the VAT registration threshold?

The current VAT registration threshold is £79,000 for the preceding 12 months (changed from £77,000 on 1 April 2013). The VATable supplies calculation should be done every month and take into account the previous 12 months figures. If you exceed the threshold in the month, you have until the end of the following month to register. Your VAT registration will be effective the first day of the following month.

For example, if your VATable supplies for the 12 months ended 31 May 2013 (as calculated between 1 June 2012 and 31 May 2013) exceed £79,000 , you have to register with HMRC by 30 June 2013 and the VAT registration will be effective from 1 July 2013.

Adsense income and other non UK commissions (eg US, Gibraltar etc) are excluded from this calculation as they are “out of the scope of UK VAT”. Commissions from EC based networks such as Amazon, Ebay, Commission Junction and Cleverbridge are also “out of the scope of UK VAT”.

If you have met the threshold or wish to voluntarily register for VAT, we at HRBS would be pleased to help you. Our VAT registration service costs from £210.00 and includes a review to check when you were required to register for VAT, whether the Flat Rate VAT Scheme would be beneficial for you and the first VAT return in which you can reclaim some of the VAT incurred prior to the registration date.

For a fixed fee quotation please click here.

[article updated 20 May 2013]