VAT on the major PPC engines

[Stavros]

Hi, first post. My question relates to how the big PPC engines display VAT charges.

Google. As I understand it all prices on the campaign summary page are ex VAT, Google doesn't add VAT until they make out the invoice? Is this correct? Is there a way to alter the figures so they display inclusive of VAT?

MSN. I think I'm correct in saying that AdCenter doesn't charge VAT as they're not based in Europe?

Yahoo. Do YSM charge VAT? Are click prices displayed inclusive of VAT?

Thanks!

[Riddys]

Adwords are based in Ireland where it is 20+ % VAT. Therefore you can opt for adwords not to add the VAT if you choose. You must pay the tax due in the country you reside in. I have always allowed the saving to account for itself as the amount you save will form part of your profits, which will get taxed at sourced anyway in due course.

MSN do not add VAT to their bills, why this is I do not know.

Yahoo bidding prices exclude VAT, but are charged with VAT.

[KirstyM]

If you are using Adwords for business purposes you don't pay any VAT. There's an option to select for this on the campaign management interface.

I'm sure others can explain the reasons why better than myself!

[hirschnathan]

If you turn over over £57k you have to register for vat, you can reclaim your vat but then you have to pay vat on your commissions. As far as I know each ltd company has a seperate threshold.

[KirstyM]

Adwords does not charge VAT on accounts being used for business purposes regardless of whether you are VAT registered or not. My understanding of all this is less than clear, despite having been involved in many discussions about it!

When Adwords brought in this policy it was in response to an EU ruling on the way they were applying vat to advertising services. Once you said your account was for business purposes your vat payments were refunded. I think because you are the provider and recipient of the service the VAT element is cancelled out.

Here's a previous post made by an accountant on this issue, which is clearer than my vague ramblings: -

Hi,

Under the reverse charge rules, VAT on adwords expenditure is shown as both output and input VAT even though you do not have to pay the VAT to google. ie it has no effect on your VAT bill (unless you are on the flat rate scheme - see below).

This "deemed VAT" at 17.5% of your adwords spend for the quarter should be included in boxes 2 & 4 and the ex-VAT value included in box 6 & 7.

The HMRC guide to completing A VAT return is here:
http://customs.hmrc.gov.uk/channelsP...ent#P250_16895
(see section 5)

As pointed out, for VAT registration purposes, your adwords expenditure should be added onto your other turnover in calculating whether you should be VAT registered. Adsense income is excluded from this calculation as it is "out of the scope of UK VAT".

The registration threshold is £61k for the preceeding 12 months. ie the threshold must be considered each month.

There are several posts on this in the Business forum as VAT on adwords is a common question.

Barry
- see my post at http://www.a4uforum.co.uk/showthread...624#post242624 (post 11) regarding the flat rate scheme and adwords.

To summarise if you are on the flat rate scheme you have to pay the full 17.5% VAT on the adwords expenditure to HMCE as it is entered into box 2. See section 7.8 of the VAT guide at http://customs.hmrc.gov.uk/channelsP...ent#P109_11230

Actual and "deemed " input VAT is ignored under the flat rate scheme.

Regards

Keith
HRBS
Small Business Specialists

[Darren M]

If you are using Adwords for business purposes you don't pay any VAT. There's an option to select for this on the campaign management interface.

I'm sure others can explain the reasons why better than myself!

When I first signed up for Adwords I didn't sign up as a business and it took me a while to realise they were charging me 20% extra for the VAT

I spoke to Google about this and they asked for my company details. A few weeks later they sent me a cheque for several thousand pounds So if anyone else is in the same situation it's worth trying to get this VAT refunded. My claim went back several months.

[Stavros]

I think Google's position on VAT is a tad confusing, I just read their help documents and I'm still none the wiser. We don't use PPC (yet) and the original question was actually asked for a friend who does, but only on a small scale (nothing close to 57k turnover). They're not VAT registered but are slowly building a business around their PPC efforts in the finance sector. As I understand it from Kirsty, by informing Google that you're a "business", you can avoid Google's VAT charge?
Thanks for everyone's replies, much appreciated.

[ian-d]

Guys, i don't get this, i've run adwords for a long time, up until January with a sole trader account, and from jaunary on with a limited company account, neither vat registered.

Does the irish vat charge adwords have applied to all my bills apply, or should i be asking for it back? I've not got the option to select 'using for business' in the account settings, it is greyed out!!!

Any help appreciated.

[Stavros]

Does the irish vat charge adwords have applied to all my bills apply, or should i be asking for it back?

I *think* you should be asking for it back assuming you've been charged at 20%, I'm going to email G and see if I can get a straight answer (ha!).

I've not got the option to select 'using for business' in the account settings, it is greyed out!!!

Any help appreciated.

I've just checked this in Google's help pages, apparently it's not possible to change your account from non-business to business or vice versa, you need to email Google to change the setting manually.

[KirstyM]

I can absolutely 100% confirm that if you're using your adwords account for your affiliate business you should not be paying the 20% VAT.

I got a VAT refund before I became VAT registered (which the effing tax man then charged me tax on!).

[hrbs]

If you turn over over £57k you have to register for vat, you can reclaim your vat but then you have to pay vat on your commissions. As far as I know each ltd company has a seperate threshold.

Hi,

Threshold is now £64k, but includes VATable sales and Adwords expenditure.
ie if sales are £50k & Adwords expenditure £14K you have to register for VAT. The threshold is for the preceeding 12 months or if you expect to exceed the threshold in the next 30 days sales/Adwords you will need to register. (ie £64k in the next month alone).

Adsense (and similar non UK) income is excluded from the calculation as it is out of the scope of UK VAT - but is still taxable (income or corporation tax if you are a Ltd Co.)

UK commissions - if you are VAT registered you will charge VAT, receive it from the networks and at the end of each quarter pay it to HMRC ie you will be no worse off. You can reclaim the input VAT on costs such as UK hosting, PC, software, broadband, mobile phone etc. VAT can only be reclaimed where the invoice/bill has a valid VAT number, costs such as postage (not courier services such as UPS) are exempt for VAT purposes.

If your turnover is below the VAT threshold but you have high input VAT (not usually the case for AM unless lots of UK expenditure and non-UK sourced income which is out of scope of UK VAT), you can voluntarily register for VAT and recover the input VAT.

As usual there are HMRC penalties for not registering at the correct time. Also it is illegal (ie fraudulent) to charge VAT if you are not VAT registered.


Hope this helps clarify a few points.

Keith
HRBS Limited
Small Business Specialists

hrbsonline.com - the online accounting solution

[ian-d]

For everyones information, my adwords campaign was being run as a personal account for about a year, i hadn't even realised. I emailed adwords to tell them to change it over, and to investigate whether i was able to claim back the VAT for the entire period of using their service as i wasn't VAT registered. They have taken about two weeks but today come back to me and confirmed that i am infact entitled to a refund and that £500 is coming to me in the form of a cheque over the next few weeks...result.

If anyone needs info on how i approached this (thx to my accountant) please let me know on here.

[KirstyM]

Not only that, but all your Adwords PPC campaigns are now 20% more profitable. The drinks are on you at the next G2G!

[ian-d]

haha, friad that money has already been spent, am vat registered from next month!

[zaq]

Not only that, but all your Adwords PPC campaigns are now 20% more profitable. The drinks are on you at the next G2G!

i dont understand dont you still have to add VAT to your google invoice to give to the uk taxman, so say you sent $10000 one year you send the tax man a chq for $1750 at the end of the year to pay for google adwords VAT