VAT ZERO RATING ADVERTISING What types of advertisements does the relief cover?

The following notes are largely extracted from HMRC Notice 701/58.
What types of advertisements does the relief cover?
The relief covers all types of advertisements on any subject, including staff recruitment. The name or
logo of the University does not need to be included for relief to be allowed. However the University‘s
advertisements must comply with its charitable objects. This relief does not override charity law or
the need to comply with the British Codes of Advertising or any other relevant regulations.
Qualifying and non-qualifying advertising media
In what media can the University advertise VAT free?
Any medium which communicates with the public. This includes all the conventional advertising
media such as television, cinema, billboards, the sides of vehicles, newspapers and printed
publications. The important factor is whether the advertisement is placed on someone else’s time or
space. If it is not there will be no scope for zero-rating.
If space is sold to the University for advertising on other items, such as beer mats, calendars, or the
reverse of till rolls, this will also be covered by the zero rate. The sale of the items themselves will
not be VAT free, unless they qualify for other reliefs for example as books or children’s clothing.
What does the term “the public” cover?
It means the general public - which can be widely interpreted to include businesses and small
This includes general groups such as:
readers of a trade magazine;
readers of a religious magazine; or
people in particular parts of the country who may be targeted by a general poster campaign in
their area.
It does not include selected individuals or groups.
Who are selected individuals and groups?
These are people who are:
selected by individual home, business or e-mail address whether named or not;
individually named people, all those at the same address such as family groups or everyone in a
particular building.
Do direct mail and telesales qualify for relief?
Both are excluded from the relief because they are not a supply of advertising time or space but are
marketing and advertising addressed to selected individuals or groups. Direct mail includes that sent
by post, fax or electronically.
However, individual elements of a postal package may still be zero-rated either under the
concession for appeal letters and envelopes or because they qualify as printed matter.
Does information on the Internet qualify for relief?
Information, whether or not in the form of advertising, placed in, on or through a University’s own
Internet site, does not qualify for zero-rating. This is because it is not a supply of someone else’s
time or space whether or not the website is owned, rented or loaned to the University. Since the
information on the website is excluded from the relief, it follows that the associated design costs are
also excluded.
However, an advertisement placed on a third party’s Internet site does qualify for zero-rating.
Which advertising methods are excluded from the relief?
Any method that is not the supply of someone else’s advertising time or space, or is in the form of
general marketing and promotion. The following are excluded:
direct mail and telesales;
anything on a University’s own Internet website;
advertisements where there is no supply of time or space to the University, for example, an
advertisement on a University’s own greeting cards;
exhibition stands and space;
services of distribution;
commemorative items whether or not they bear the University’s logo, for example, pens and
adult clothing.
Design and production of advertisements
Does the design or production of an advertisement qualify for relief?
Provided it is intended that the advertisement will be placed in purchased or donated advertising
time or space, the supply of design or production of the advertisement will qualify for relief. This
includes the design of a poster or the filming or recording of an advertisement to be broadcast.
What goods linked to the design or production of the advertisement will qualify for relief?
Goods closely related to the design and production, for example:
a finished article like a film or recorded cassette;
an element to be incorporated in the advertisement such as a photograph, picture or a sound
all alternative versions of an advertisement produced, to see which works best, even if it is the
intention that only one version will be used.
If the University creates its own advertisements is there any relief?
No, because this is not a supply to the University. Therefore, it is not possible for the University to
purchase the equipment and raw materials they use in creating these advertisements VAT free.
What is the liability of services involving advertising agencies?
When the University uses an advertising agency instead of having a contract with the suppliers of
advertising or printing, the VAT liability depends on whether the agency is acting as a principal or an
agent. The normal VAT rules for agent/principal agreements will apply. Briefly this means that:
where an advertising agency is the principal, the advertising agency’s supply of qualifying
advertising time or space (for example television broadcasting time) and associated production
costs to the University will be zero-rated. However, supplies to the agency will be standard
where an advertising agency acts solely as an agent, the agency fees, charged to the University,
will be standard-rated. The supply of the advertising time or space will be direct to the University
and will be eligible for zero-rating under this relief in the normal way.
It looks as if the liability has to be determined backwards. Is this so?
To some extent, yes. It must first be determined whether a proposed advertisement is intended to
be supplied in a way which will qualify for zero-rating. If it is, the preceding design and production
work, when supplied to the University, will also be zero-rated.
Will the University have to pay VAT retrospectively on production costs if the advertisement does
not get used?
No. Provided it was clearly the University’s intention to use the services for an advertisement which
would have qualified for relief, it will not be required to pay the tax in the event of the work being
Can the University apply for retrospective relief on goods or services purchased for another
purpose but subsequently used for a qualifying advertisement?
What if the advertisements are used in qualifying and non qualifying media?
When the University knows that a proportion of its purchases, such as posters or artwork for
magazine advertisements, are going to be used in public places as well as in-house (for example in
the University’s own magazine or shop window), this should be reflected in the declaration given to
the supplier. The VAT liability should be split accordingly