VAT on Leads

[retrocowboy]

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Hi guys,

This has probably been a topic before but has anyone got written confirmation from the lovely VAT man as to whether we NEED to charge VAT on leads or not. There are still a few companies out there that do charge VAT and personally we don't. I've spoken to several experts as have my staff and they all reckon we don't need to as we add value etc. However on talking with 3 different VAT bods at HMRC I received 3 different answers (you're wondering how I got 3 aren't you!).

Anyone fancy sending me a copy of a letter saying we don't need to charge VAT.

Sorry to be a bother.

[peracto]

Retro Dude!

I can confirm that Peracto does not charge VAT on its "Hot Leads". I had my accountant research this and provide a written document to that effect for our records. This excersise cost us around £1,200.00 but was well worth it. I'm happy to put you in touch with my accountant but I'd be unwilling to give you a free copy as we had to pay for it!

Regards

Jules
Peracto

[abc]

We dont charge or pay VAT also..

Rick

[acutts]

We are paid VAT on leads by our network - CPAN, they may be able to comment further on the reasoning why...

[bioalien]

Excellent topic, I was about to start one myself having been in discussion with various bodies and in consultation with 2 accountants and a VAT expert.

Before I start, I'd like to divert your attention to this discussion and using Leadbay as a prime example:
http://www.affiliates4u.com/forums/f...s-program.html

On the whole, if "Finance" is deemed VAT exempt supply, as per HMRC's notice then any attributable supply must also be exempt. Hence, as an affiliate using any advertising methods to generate your leads, if you don't charge Leadbay VAT (i.e. accept that it's an exempt supply) then you must run this all the way and class any advertising expense as an exempt supply. You stand to lose 17.5% tax on either:
a) INPUT: income generated from networks that don't pay out VAT such as Leadbay and 123DS.
OR
b) OUTPUT: advertising spend and any other attributable supplies such as webhosting, domains, web development, telephone, internet etc. Google is the biggest culprit here as they fall under the VAT reverse charge rule so don't be fooled if you think they are not charging you VAT!

We lose 17.5% of our Leadbay commission revenue as our accountant advised that we should be paying VAT. If we class ourselves as exempt and don't pay the Leadbay VAT (INPUT) then we can't claim back the VAT paid on attributable expenses (OUTPUT). I don't understand why we are paid VAT by the larger networks including OMG, TD, AW, CJ, Smart Quotes and CPAN but not by Leadbay. Even AMS commissions work out better as they're based outside the EU - no VAT to worry about!

So if you work it out:
Leadbay gives you a standard 50% - 75% commission from leads generated. Slap an average rejection rate. Then slap a 17.5% tax that you have to fork out from whatever is left over if you are VAT registered.

Do you think Leadbay, 123DS and other such networks will be around if the big UK VAT registered affiliates drop out? I guess it comes down to how much of their volumes are generated by UK affiliates.

I would love to hear more from what others have been advised especially rival networks.

[simonb]

I wasn't going to respond to this thread but after that resounding criticism from Dee I think I need to. The most important thing to say is that this is a complex issue and that I know various affiliates and networks have had many differing viewpoints given to them from both trusted advisors, local HMRC offices, HMRC at a higher level and VAT tribunals.

Leadbay does not charge VAT on mortgage leads and does not allow affiliates to charge VAT on top of the gross figure paid by brokers. Affiliates may however charge VAT as part of their invoice if they wish. Whether an affiliate does or not depends completely on the advice that they have been given. Some of our affiliates are based outside the UK, some are below the VAT threshold. Most are not however and a significant proportion of UK affiliates do not charge VAT as they have been advised that supply of mortgage leads is exempt. It is clear that there is no single simple answer to this question and it is not down to Leadbay to liaise on behalf of each of it's 500+ affiliates. It is clear that each of those affiliates who have taken advice or spoken to HMRC have subtly different businesses and position their arguments slightly differently which is why there are different positions for what seem to be similar businesses.

One difference between Leadbay and the other networks is that we are a specialist financial services network and as such we are regulated by the FSA (unlike the other networks mentioned i believe) and we work in distributing the leads to over 7000 mortgage brokers unlike most networks who have a relationship with a single broker or lender. As an aside since Leadbay came along I don't know of any successful mortgage programs through a traditional affiliate model as they either pay too little and get no traffic, pay too much get flooded and close or only take such a small percentage of the mortgage market as to be not worth it for affiliates.

As far as AMS being based offshore to avoid paying VAT this is not something I really believe will be be a long term solution but welcome any comments from Michael on this.

Lets just move into a bit of hypothesis though and look at how things might change if Leadbay (or anyone else) were to pay VAT on top of its gross price. The first thing we would have do is charge brokers VAT. Mortgage brokers would not be able to claim this back though and as they are in an open bidding system and their profitability would be reduced by 17.5% they would just reduce the amount they are willing to pay by 17.5% hence reducing the amount coming back to affiliates. The net effect to VAT paying affiliates (e.g. Dee) being nothing. The effect for non VAT paying affiliates is that they loose 17.5%.

So my advice Dee would be to do some more research and look at the advice you have been given. Also please do not tar all affiliates with the same brush regarding rejection rates. Your rejection rate is significantly higher than the average Leadbay affiliate. Also I don't understand why you put a link to a single post in a thread that contains factually incorrect information that I correct in the next post http://www.affiliates4u.com/forums/f...s-program.html.

The VAT position has been the same for several years now and all of our big UK affiliates are satisfied and still with us. Infact Leadbay has grown month on month despite the adverse credit conditions and a turbulant mortgage market. We are the largest mortgage lead distributer in the UK and the only distributer who can take unlimited volumes of any type of mortgage leads 24/7/365.

[dean1st]

ok, i've read dee's and simons replies, and now im a tad bit confuddled here if dee is correct and finance is exempt does that mean all finance leads i.e. loans/mortgages/iva/debt man/insurance/investments are all vat exempt??

simon you only mention mortgage leads.....so whos right?

[simonb]

Leadbay will pay VAT in addition to the gross price on IVA/DM leads for VAT registered UK companies.

Leadbay will NOT pay VAT in addition to the gross price on mortgage and loan leads. Affiliates are welcome to incorporate a VAT element in their invoices to us for these amounts as explained above.

[anshul123]

HOpe ther would have been Vat on them - another 13% would have made it easier for vendors to make the invoice look better and closer to sales target

[russell cpanuk]

Hi All

Carter Phillips Affiliate Network is indeed VAT registered, despite being a finance network. We have battled long and hard with HMRC over many issues and have been granted partial exemption for some of the products in the directory.

Just to make it clear, you can not take a blanket rule on VAT, just because one company is not charging it does not mean that another doesn’t have too, or vise versa.

Our partial exemption rule applies to under 9.1 intermediaries and applies only under certain circumstances.

We have to prove that we do more than just take a lead in and sell it on. Hosting merchants forms and sites, postcode look-up, are just a few ways to claim you are an intermediary.

We charge VAT on the following:-

VAT is charged for all bespoke software work.
VAT is charged for all external campaigns where leads are supplied and no internal work has been carried out.

VAT is not charged for internal campaigns where the micro site is hosted on our servers.

To expand on this, VAT is not charged if Carter-Phillips supplies “more than just a lead”. When our internal systems, underwrites, exports to different lenders on the merchants behalf, generates documentations, credit checks, including location checks.

Good luck, you will need it!

[retrocowboy]

Thanks Russell, that seems to be the most helpful comment I've seen. I've had another 'specialist' round and of course I've been told something different to what I'd be told last time. So we've ignored them and done it our own way (brave I know but if they all say something different what's the point in listening).

This is what we've decided however, if dealing with remortgage/loan leads we will charge VAT if we pass on with no internal work or replacement policy. If however we deal with replacements or produce these leads then we will not charge VAT. For ALL other leads outside of that criteria we will charge VAT.

I love VAT

Anyone with further thoughts let me know.

[123debtsolutions]

Well done only a 6 month old post...

[Plowebrokerage]

(old post soz guys newby)