Google AdSense VAT

[nickjohnston]

Hello all,

I run Google AdSense adverts on a number of websites to generate some extra income, and I've recently registered for VAT. Google state that:

"your payments are being made by Google Ireland, a company incorporated under the laws of Ireland. In accordance with the terms of your agreement with Google, the services provided are subject to the reverse charge mechanism and so VAT is to be accounted for by the recipient, Google Ireland, per Article 196 of Council Directive 2006/112/EC"

Can someone explain that to me, in plain English?

 

[MASSEY]

There was a thread recently about this. I think the outcome was google were not conducting themselves correctly. But there is nothing anyone can do about it.

 

[nickjohnston]

Seemingly, Amazon use the same reverse charge system for VAT. Sounds to me like I wouldn't need to pay VAT, as they account for it at their end. Strictly speaking though, I should issue a VAT invoice to them.

https://affiliate-program.amazon.co...ssoc-center-2&pf_rd_r=&pf_rd_i=assoc_help_t18

 

[MASSEY]

I think that was it. Some one was pointing out that the government are losing out on a potentially healthy income stream.

Im suprised so many people are questioning it really, its saves you money at the end of the day.

 

[3pic]

Hello all,

I run Google AdSense adverts on a number of websites to generate some extra income, and I've recently registered for VAT. Google state that:

"your payments are being made by Google Ireland, a company incorporated under the laws of Ireland. In accordance with the terms of your agreement with Google, the services provided are subject to the reverse charge mechanism and so VAT is to be accounted for by the recipient, Google Ireland, per Article 196 of Council Directive 2006/112/EC"

Can someone explain that to me, in plain English?

The Place of Supply of certain services - such as advertising and marketing - now come under reverse charge rules.

If Google have your (the customer) VAT number or if you confirm you are a 'business', Google will zero rate their supply of advertising services to you. That means your invoice from Google shows VAT @ 0%.

You (as the customer) then account for VAT on your VAT return by calculating the UK VAT on the Google invoice and recording the VAT value in Box 2 of the VAT return. If you are able to reclaim 100% of your input tax then you record the Box 2 value also in Box 4 - thus you pay over VAT in the UK and reclaim it in the UK at the same time.

If you cannot reclaim input tax in full, you still pay it over in Box 2 and then only reclaim what % of input tax (if at all) in Box 4.

If you're not VAT registered, those Google invoices count towards your taxable turnover for VAT threshold purposes and so you need to include in your calculations to determine whether you've gone over the £70k threshold.

A really good article here explains it fariyl well :-

http://www.sayervincent.co.uk/Asp/u...es on reverse charges from 1 January 2010.pdf

 

[David Richards]

The Place of Supply of certain services - such as advertising and marketing - now come under reverse charge rules.

If Google have your (the customer) VAT number or if you confirm you are a 'business', Google will zero rate their supply of advertising services to you. That means your invoice from Google shows VAT @ 0%.

You (as the customer) then account for VAT on your VAT return by calculating the UK VAT on the Google invoice and recording the VAT value in Box 2 of the VAT return. If you are able to reclaim 100% of your input tax then you record the Box 2 value also in Box 4 - thus you pay over VAT in the UK and reclaim it in the UK at the same time.

I got the impression that it's the other way around; that Google are paying the OP. So effectively the OP would 'invoice' Google (or more likely that Google actually self-bills and then pays the OP).

If that's the case I guess the OP would just zero rate the 'sale' and ensure it's recorded on an EC Sales List (along with Google's VAT number).

Apologies if I have completely misunderstood the situation.

 

[3pic]

I'm getting confused between Adsense and AdWords.....again.

But yes, if this is a sale to Google in Eire, then the OP zero rates the sale to them as you've already stated.

If the OP is on Flat Rate Scheme then this would mean they do not charge VAT to Google but still have to pay x% over to HMRC as the google income counts towards their flat rate calculation.

 

[nickjohnston]

Thank you for your comments.

To confirm, I'm an AdSense publisher, i.e. Google pay me to display other's ads.

And, to clarify, I treat my income from AdSense as 0% VAT?

The EC Sales List is new to me - would it be the VAT Reverse Charge Sales List (RCSL) in this case?

 

[David Richards]

And, to clarify, I treat my income from AdSense as 0% VAT?

The EC Sales List is new to me - would it be the VAT Reverse Charge Sales List (RCSL) in this case?

No, the RCSL is used for something else. Confusingly there different types of reverse charge! (The RCSL is an anti-fraud measure and only used when a UK VAT-registered business sells more than £5000 of mobile phones or computer chips to another UK VAT-registered business.)

Based on the discussions above; effectively you are supplying a service to a VAT-registered business in another EC country (i.e. Google). The rules changed on 1 January 2010 meaning that if you get their VAT number you can zero rate the 'sale', but you have to report it on an ECSL.

If you use bookkeeping software that handles VAT return filing and EC VAT, then you might find it can also process and file the ECSL for you. Otherwise you can file the ECSL on the HMRC website, or download a paper return (a VAT101 form).

ECSLs are generally filed quarterly (March/June/September/December, so they may not match your VAT quarters) although some business have to file monthly. You have 21 days after the end of a period to file online, only 14 days if you file on paper.

 

[nickjohnston]

Thank you David, that's all very clear. Very much appreciated.

 

[UKSBD]

you can do your ec sales list online (same places as VAT)

All very simple but make sure you get your dates right and include all relevant details on the invoice.

I tend to do my invoices on 10th of month and make the VAT tax point the last day of previous month.

i.e.
Mays earnings will be invoiced on 10th June with tax point of 31st May

Include their VAT number on the invoice, state it is for internet advertising services, is in sterling, is an intra-ec supply, and add
*The services provided are subject to the reverse charge mechanism and so VAT is to be accounted for by the recipient, Google Ireland, per Article 196 of Council Directive 2006/112/EC.

also make sure you add GB at the start of your VAT number.

Google say you don't have to send them an invoice, but I do.