Are you accounting for VAT on Google AdWords and Linked In?

Pay per Click

AdWords are invoiced from the Republic of Ireland and subject to ‘Reverse Charge‘ VAT.

When you buy services from suppliers in other countries, you may have to account for the VAT yourself – depending on the circumstances. This is called the ‘reverse charge’, and is also known as ‘tax shift’. Where it applies, you act as if you are both the supplier and the customer – you charge yourself the VAT and then, assuming that the service relates to VAT taxable supplies that you make, you also claim it back. So there’s no net cost to you – the two taxes cancel each other out. [HMRC]

If you can’t give Google a UK VAT registration number they will charge Irish VAT at 21%.

If you can supply a VAT registration number you won’t be charged Irish VAT and will be subject to ‘Reverse Charge’, this means you calculate the amount of VAT – Output Tax – on the full value of the services supplied to you, and then fill in the relevant boxes on your VAT Return as follows:

  • put the amount of VAT you calculated in Box 1, and if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in Box 4 (this in effect cancels out the figure in Box 1)
  • put the full value of the supply in both Box 6 and Box 7

So all the figures net off to Zero!

If you make reverse charge sales – sales to which a reverse charge is applied – you must notify HMRC and send in regular Reverse Charge Sales Lists.

Linked In invoices are also subject to ‘Reverse Charge’ this is how you can give Linked In your VAT Registration:

If you purchase LinkedIn products for business purposes, you can provide your Value Added Tax # (for European Union or EU VAT customers) for proper tax handling. This information can be added for future orders (not past receipts) on the Payment section of your Privacy & Settings page.

To add your VAT number:

  1. Move your cursor over your profile photo in the top right of your homepage and click Privacy & Settings. For verification purposes, you may need to sign in again.
  2. Click Manage Billing Info.
  3. Click Edit next to the VAT # field.
  4. Enter the 2-character country code followed by your VAT#. For example, LinkedIn’s Irish VAT# is IE9740425P.
  5. Click Update.

Here is a great guide I found which explains how to master adwords

Why are we hanging international non-UK tax payers out to dry?

Never before has so much coverage been devoted to multinationals who pay low levels of UK tax.

Matt Brittin, commented during the public accounts committee grilling of Google, Amazon and Starbucks on Monday 13 November – “I wish we had invented Google in Cambridge, but we didn’t”.  The point being that the royalties would then be flowing to UK instead of the US.

Ironically, HMRC have actually done rather well out of International Transfer Pricing Rules, they collected over £1bn in tax revenues from transfer pricing audits in the year to March 2012. The OECD have clear rules on how international transactions should be valued.

The government have been working hard to make Britain competitive on taxes.

In the 2010 Emergency Budget the Chancellor George Osborne outline a package of reforms with the intention of turning the UK into “the most competitive tax system in the G20”

The UK’s tax competitiveness has improved the most for business among major economies over the past two years, according to a study.

The country ranks six out of 14 worldwide, ahead of the US and all European countries analysed, with its score having been enhanced by almost 15 percentage points since 2010, analysis by KPMG shows.

The research took a selection of business levies, including capital taxes, sales taxes and property taxes, to calculate a total tax cost, which was compared between locations using the total tax index (TTI) for each location.

TTI is KPMG’s measure of the total taxes paid by corporations in one nation or city, expressed as a percentage of total taxes paid by corporations in the US – which is given a TTI of 100 that represents the benchmark against which all other locations are scored.

The lower the score earned, the more attractive a country is from a business tax perspective. With a TTI of 73.3, compared to 88 in 2010, the UK ranks immediately above the Netherlands (77.2), and has a fewer points than Germany (122), Japan (152.3) and France (179.7) among others. India, a new entrant, tops the chart with a TTI of 49.7.

So we are actively trying to get businesses to make their profits in the UK so that they pay less tax.

David Cameron highlighted the benefits of investing and inventing in the UK, at the Health Summit in August 2012 he said

The Patent Box means that if a company creates intellectual property in the UK, it will pay a corporation tax rate of just 10% on any profits generated by those patents.

Let me say that again: 10% corporation tax on patent profits – among the lowest in the developed world.

We want companies to come to the UK and pay less tax, so why are we complaining? we stand to gain the most, surely the last thing we want now are international rules that stop businesses from taking advantage of our new competitive tax regime?