HM Revenue & Customs (“HMRC”), the UK’s equivalent of the CRA, recently updated its policy on charity digital advertising. The refined policy applies zero value-added tax (“VAT”) tax on five types of digital advertising by charities, all of which target an aggregate of IP addresses, rather than singling out individuals.
As we know, VAT is paid at the point of sale by customers, aka buyers. In the view of the HMRC, for example, when a charity buyer purchases advertising service which sends ads to a personal email, the charity needs to pay VAT because a ‘sale’ takes place -- the advertisement reaches a selected individual.
In contrast, when the same ad appears as an entry after a person entered ‘donate’ in Google, the charity is not liable for VAT, because the ad reaches an audience in aggregate.
HMRC drew a very fine line here. Arguably, the difference between selected individuals and aggregated audience is justified, because the latter does not produce a specific number of sales, hence falling outside the scope of VAT. However, what if we lift the veil of the collective and count the number of individuals (IP addresses/accounts)? What if one searched “donate to charity A” rather than ‘donate’?
Answers await, I suppose.