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VAT on Internet Advertising
This is something you may be interested in, as many businesses now place adverts on popular websites such as Google or Facebook. The advertising sold by Google (including 'adwords') is an international service for VAT purposes as it is sold to UK businesses by Google Ireland Ltd from Dublin. Facebook appear to invoice from their base in USA, so advertising on the Facebook site is also an international service for VAT purposes.
A UK business should not be charged VAT on the cost of the advertising in either case, as the cost is subject to the reverse charge regulations. This means, a UK VAT registered business must add VAT at the UK standard rate to the cost and add the gross cost to both purchases and sales for the period. The UK business pays the VAT due as if it had made the sale, and it also reclaims the VAT due on the purchase cost. The net effect for a VAT registered business should be zero, unless it makes VAT exempt sales. This is explained in the VAT notice 741A (see below).
The reverse charge mechanism applies whether the supplier is within the EU or the rest of the world (outside the UK), so the same treatment applies to invoices from Google Ireland Ltd and from Facebook. However, certain accounting software programmes need some special tweaks to cope with the reverse charge on purchases. Check that your system is processing the VAT on the internet advertising costs correctly.
If you have been charged Irish VAT at 21% on the Google advertising, this may be because Google Ireland Ltd has recorded the customer as being a private person not a business. Your client can reclaim this erroneously charged VAT from Google Ireland Ltd, but it cannot reclaim the VAT through the international VAT refunds service as the VAT should not have been charged in the first place. Make sure you do not include the Irish VAT on your UK VAT return as it is not correctly charged VAT
The NIC Holiday
In our newsletter of July 2010 we promised to
keep you updated about the proposed NIC holiday which was announced in the Budget on 22 June. This scheme was due to start on Monday 6 September 2010, so on 27 August 2010 HMRC released some
draft legislation and a technical note. Further guidance for employers is expected to be released on the HMRC website, (or possibly on the Business Link website) before the start date, but at the
time of writing this has not appeared.
We now know the NIC holiday will only apply to:
- The first 10 employees a business employs for the purpose of its business in its first year of business. If an employee leaves in the first year their place in the NIC scheme cannot be taken by a new employee.
- Earnings paid to those employees on or after 6 September 2010, in the first year of employment or that part of the first year that expires before the scheme ends on 5 September 2013.
- Employers' Class 1 NICs payable on the above earnings, (not employees' contributions), up to a maximum of £5,000 per employee.
The conditions the employer will have to meet are:
- Demonstrate that its principal place of business is outside of the excluded areas (Greater London, the Eastern and the South East regions of England).
- Have its application for the scheme approved by HMRC.
- Be a new business formed on or after 22 June 2010. There are a number of examples in the HMRC technical note of when a 'new' businesses will be eligible for the scheme, as the definition of 'new' looks to be problematic. The incorporation of existing businesses will expressly NOT qualify.
The following employers will definitely NOT qualify for the scheme:
- Businesses that do not have a trade, such as public sector employers.
- Those employing personal or domestic employees such as nannies, cooks, gardeners or carers.
- Managed Service Companies.
However, businesses subject to IR35 can qualify for the NIC holiday in respect of the regular salary paid to the workers, excluding any deemed salary calculated under the IR35 provisions and are
deemed to be paid on 5 April each year.
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(Some information on this page was sourced from Tax Advice Network)