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Updated HMRC guidance could save the third sector millions of pounds in VAT on digital advertising costs.
The tax authority previously considered most digital advertising to be subject to VAT and raised assessments to recover it from some advertising agencies.
The costs were passed down to charities and resulted in millions of irrevocable VAT.
However, HMRC stated VAT was no longer considered due on online search browsing advertisements in July, except on personal social media accounts.
This week, HMRC accepted payments for location targeting, allowing specific advertisements to focus on people in certain locations, was also within the zero rate.
The tax authority consulted with the Charity Tax Group (CTG) on the issue, that believe that money saved from the new amendment will allow charities to spend more on advertising budgets and campaigns.
Richard Bray, vice-chair of the CTG, said: ‘‘We are delighted that after further positive discussions we have had with HMRC, their view of the VAT status of digital advertising provided to charities has been clarified even further.
‘‘Not only have they accepted a wider ambit for the zero rate, but the classifications of services, based on their policy, will be much easier to apply than appeared the case before the brief was issued. It is great news for charities.’’
