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Got a VAT refund from Google.
Whose money is it? Is it mine or do I pass it to the VAT man?
Kila_m, it's probably best to contact AdWords support with this question, using the 'Contact Us' link in the account associated with the refund.
My guess? It's yours - but please don't take my word for it. ;)
We are in a business which is not allowed to be VAT registered also. We have banked the refund and will hold it in reserve if the VAT man ever comes for it. I don't see what mechanism there is for us to pay VAT if we are not registered. From now on if you are registered you have to pay VAT on your Google Adwords yourself in your VAT return as if you had received an import.
This is a typical Google cock up. What they were doing before, ie charging Irish VAT was wrong and what they are doing now is wrong. They should charge VAT in the EU country in which the service is delivered and if they can't charge it then they should inform Customs and excise so that they can charge you VAT on the import.
This thread [a4uforum.co.uk] on the A4U affiliates forum may shed some light.
Assuming that Paragraph 4.8 covers the Google AdWords service (and I believe that it does); then table 4.9 can be used to determine whether Google will be charging you VAT or not.
Note specifically that Irish legislation does not differentiate between a VAT registered and non-VAT registered business in another EU state, and therefore; if you are in the UK and using AdWords for business purposes Google should not charge you VAT.
With regards to accounting for VAT ongoing, if you are not VAT registered - end of story. If you are VAT registered; then Reverse Charge / Self Assessment [customs.hmrc.gov.uk] applies; assuming that your interpretation of the paragraph entitled "Receiving electronically supplied services" on this page [customs.hmrc.gov.uk] applies to Google AdWords.
ps801rk's link is quite informative. The user on that forum who wrote an e-mail to HMRC. Question 3 in particular seemed interesting.
It seem to be suggesting that the value of your advertising which you have not paid VAT on should be added to your turnover, to give a total 'Vat able' Turnover. Which does make sense if you think about it. So if you Turnover £58,000 (to purposely keep below the threshold) and spent £5000 with Google on Advertising, you would now need to add the 2 together to get your total VAT able turnover, which would be £63,000 is this scenario, meaning you would need to register for VAT.
That almost sounds logical but could you declare the bill as a cost as well as adding it to your turnover?
Does that sound logical to anyone else. I have a basic grasp of VAT, but this is a situation I haven't come across, or would want to be in.
Maybe it would just be easier to move to the Channel Islands?
These are the steps I take and how I fill in the boxes.
Firsly I look to my business bank statements and add up all the amounts deducted by Google. These obviously do not have VAT added to them because I told Google I was VAT registered.
Once I have this figure I times it by 0.175 this gives me the number I need to put in Box 1. For example if I have been paid by CJ, I need to look at their self billing invoices to see how much I also need to add to this figure. In fact if you have been invoicing work during the quarter you need to add the VAT you have received as well.
Box 2 is zero
Box 3 is the sum of Box 1 and 2
Box 4 is basically VAT you are basically claiming back, so this includes the Adwords total times 0.175 as inputted in Box 1. If for example I bought some computer equipment I would add the VAT here. Also your broadband supplier will have added VAT to your bill so I usually add half here because the other half I say is for personal use.
Box 5 is the difference between Box 3 and Box 4. If it is a negative number you need to send the VAT man this amount, if it is positive you will receive that amount within 2 weeks of submitting your return.
Box 6 is the total amount of revenue received so here you would but the CJ commission minus the VAT. Plus you put the total amount you have spent on Adwords.
Box 7 is Box 6 plus all things like computer equipment, mobile phone , boardband but minus the VAT.
Hope this helps.
With regards to accounting for VAT ongoing, if you are not VAT registered - end of story.
What if you are a company working in the UK insurance industry. You are not allowed to be registered for VAT and therefore you cannot recover VAT from VATable services. You are therefore treated as an end user in VAT terms.
It would be nice but I can't somehow believe that HM C&E are going to be happy for insurance companies and brokers to be releived of the VAT burden on Google Adwords in such a simple way.
Or do you know more?