If you incur spend on Google Ads or similar providers, then the VAT place of supply rules can throw up unique situations that could leave you falling foul of your compliance and reporting obligations.
In particular, where advertising services are received from suppliers based abroad (e.g. Google Ads in Ireland), VAT has to be accounted for by the recipient of these services under the reverse charge mechanism.
The key point is that these advertising costs need to be included when calculating VAT-able turnover, and these costs can therefore inadvertently tip businesses over the VAT-registration threshold. Even where you are making only exempt supplies, the advertising costs need to be considered.
We have seen live examples of businesses having omitted to consider these costs for several years.
In one case, a fully-exempt business had a VAT registration obligation stretching back over 10 years and totalling in the region of £1 million, purely as a result of the advertising costs it had been incurring. A robust and prompt disclosure to HMRC was therefore required to manage the situation, and ensure that the VAT position was regularised as soon as possible.
Given HMRC also have the power to levy a late registration penalty, it is imperative that you have fully considered your VAT reporting and compliance position when it comes to any advertising spend.
Our in-house experts have extensive experience in resolving such issues with HMRC, and are on hand to support you.
