In today’s business world with the rapid advance in internet business activities, internet advertising is hitting all time highs. Google Adwords is a popular form of marketing for getting your website onto the Google search results page. It is an international service for Value Added Tax (VAT) purposes as it is sold to UK businesses by Google Ireland Ltd from Dublin.
If you are a UK business you should not be charged VAT on the cost of the adwords service, as it subject to the reverse charge regulations. This means, if you are VAT registered you need to add VAT at the standard rate applying in the UK to the adwords cost and add the gross cost to both your purchases and sales for the period. You pay the VAT due as if you had made the sale, and you reclaim the VAT due on your purchase of the same service. The net effect for a VAT registered business should be zero, unless it makes VAT exempt sales.
Certain accounting software programmes need some tweaks to cope with the reverse charge mechanism. You should check your system if you are not confident that it is processing the VAT on adwords costs correctly, if you are still unsure it is recommended that you check with a a Chartered accountant such as Bridgend Accountants who is familiar with the accounting package that you use.
If you have been charged Irish VAT at 21% on your Google adwords, this may be because Google Ireland Ltd has recorded you as being a personal customer, not a business. If you are a UK business, not necessarily VAT registered, you can reclaim this erroneously charged VAT from Google Ireland Ltd. You cannot reclaim this VAT through the international VAT refunds service operated by HMRC as the VAT should not have been charged by Google in the first place. You should not include the Irish VAT on your UK VAT return as it is not correctly charged VAT.
International VAT, can be a very complex area and it is recommended that you do not take any such action without speaking to a qualified accountant.
The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive and information contained within it may be out of date.