Are commission payments from affiliate networks VAT chargeable?

[hens00]

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Hello

I think the answer to this question maybe a yes, but just wanted to double check:

Are commissions paid by affiliate networks VAT chargeable?

Thanks

[mdrussell]

If you have added that you are VAT registered and have provided the networks your VAT reg number all payments from networks should include VAT.

[hens00]

Im not VAT registered but I think will exceed the threshold come the end of April, so thinking of the future really. Had a chat with an accountant and he wasnt sure if the type of commission payments were applicable when it comes to registering for VAT or not? Mentioned something about if its not VAT related, then I dont need to worry about registering for VAT. Says that if I sold advertising space to someone on my website, then it would be applicable, but not so sure about on a affiliate commission basis?? Tax is certainly taxing, and definitely boring.

[Darren M]

VAT is applicable to affiliate commission payments. You need to educate your accountant on this, as it sounds like he's not familiar with the business. I had to bring my own accountant up to speed on this a few years ago when I switched to AM.

[hens00]

Thank you, thats what I was after. Perhaps I should be charging the accountant for doing his work for him.

[SpongeBob]

VAT is applicable to affiliate commission payments. You need to educate your accountant on this, as it sounds like he's not familiar with the business. I had to bring my own accountant up to speed on this a few years ago when I switched to AM.

Doesn't that depend on where the commission's coming from? E.g. if your commission's from Google AdSense and you're paid in dollars from the US then there's no VAT payable on that.

I don't know if that still counts towards your VAT threshold or not - it may not in which case your accountant could be correct, but you'd need to check that.

E.g. if you made £40k from Adsense and £30k from UK networks then, if the US income isn't included when determining your VAT threshold, then you'd not need to become VAT registered.

If you did become VAT registered then the UK networks would pay you VAT, which you pass on to the VAT man, but Google wouldn't and the VAT man wouldn't expect anything for that.

So it really does depend on where the commission's coming from and whether income from outside VATable countries (e.g. the EU) counts towards your threshold.

[hens00]

Good point Bob, good point. 90% of my income is from the UK networks and the rest from USA. If I do end up being reluctantly VAT registered, I think I'll consider more USA affiliate programmes for future projects.

[hrbs]

Good point Bob, good point. 90% of my income is from the UK networks and the rest from USA. If I do end up being reluctantly VAT registered, I think I'll consider more USA affiliate programmes for future projects.

Hi
Do you use Adwords? If so you need to add your Adwords spend onto your UK commissions to calculate your taxable supplies for VAT purpose.
I have written numerous free guides on affiliate marketing and VAT at tips.HRBS.biz/affiliate-marketing/
They should answer your questions on VAT and tax as they apply to AM.

Why are you reluctant to become VAT registered? If your commissions are not exempt from VAT (some finance commissions are exempt), then you would not lose money. If you were on the flat rate scheme you may even profit from being VAT registered.
Read more about the flat rate scheme at Flat rate VAT scheme and Affiliate Marketing.


Regards

Keith
http://HRBS.biz

[Sue CPAN]

Hi Keith,

I think you have the finance VAT stance slightly wrong. I know you are an accountant but after running a Finance Network for over 4 years, 2 of which battling with HMRC over this VAT issue. I do know a little bit about it.
There are several grey area’s but the definitive answer we have been given is an affiliate who promotes Finance merchants through usual means, banner/text links or I frames the commission is vatable as there is no ‘added service’ and classed as advertising.

If an affiliate acts as a broker, i.e receives the information on their own forms and selects the Lender/Master broker they are going to pass the details over to then this is VAT exempt, but falls into a wholly different realm and really isn’t affiliate marketing. Generally the commission is a back end one not CPL for acting as a broker.

We as a network are partially exempt due to several and very complicated reasons, but any affiliate who generate leads for our exempt merchants STILL receive the Vat element on commissions as the affiliate supply is not exempt and treated as such.

[hrbs]

Hi Sue

Thanks for your detailed reply.
My comment re finance was based on back end commissions as this is the system most of my finance clients use. I agree HMRC & the VAT issue is a real headache, in particular, partial exemption.

Like you say, if the links are standard banners etc, then they will be VATable when he registers.

Regards

Keith
http://HRBS.biz