Cuts to digital advertising costs set to help charities

 

Digital advertising that is now exempt from VAT

 

Most, but not all forms, of digital advertising will receive a zero VAT rating. HMRC’s briefing document details the different forms of digital advertising that will now be exempt. These are:

 

Audience targeting - This is where advertisers use demographic, behavioural and other third-party data to identify an audience and place advertisements online to target them.

 

Behavioural targeting - This form of online targeting by advertisers uses cookies to identify people who have visited websites or made searches related to particular areas of interest. Advertisers then place advertisements for related products when they browse elsewhere.

 

Channel targeting – This is where specific sections of a website are targeted by advertisers.

 

Content targeting – This defines a selection of specific online content for adverts to appear alongside.

 

Daypart targeting - Advertisers choose to target only specific times of day or specific days of the week in this form of targeting. This is because sometimes there advertising is relevant to those times of the day or certain days, such as awareness days.

 

Demographic targeting - This form of targeting uses data from a number of sources, including behavioural data to identify target audiences. Advertising will be related to that data as they browse elsewhere.

 

Device targeting - When advertisers want to reach only certain types of devices, such as smart phones, tablets, desktops or voice activated devices.

 

Direct placements on third party websites - Placing an advertisement on a website without any other targeting. The choice of website is the main consideration here.

 

Location targeting - When individuals opt in to provide location data, this information is collected and combined into large datasets to target audiences who have visited particular areas. Advertisements relating to that data are then displayed as they browse online.

 

Lookalike targeting – Cookies are used to identify new supporters by looking at common traits and behaviours of current donors.

 

Pay-per-click adverts –This is used to encourage people browsing to click on an organisation’s link over others. The search engine receives a fee every time the organisation’s website is accessed through the link.

 

Retargeting – This tracks users through cookies to find them again when they browse the internet.

 

 

Digital advertising that is not exempt from VAT

 

But while the exemption will save charities money to promote themselves online there are three forms of digital advertising that will still have a VAT rating. These are:

 

• Email advertising, when charities send adverts to email addresses

• Natural hits relating to the listing of a charity in the results of a search engine is also not exempt. HMRC says: “ This happens automatically regardless of any action taken by or on behalf of the charity and just highlights text from the charity’s own website

• Advertising relating to social media or subscription website accounts. This is where people log into their personal pages and advertising is tailored accordingly

 

CTG’s Bray says that this clarification by the HMRC of which forms of online advertising are covered is also welcome.

 

“The classifications of services,” he says “will be much easier to apply than appeared the case before the brief was issued”.