VAT registration threshold is currently set to £90,000 however, it’s not only your revenue that you need to look at when determining if you have to register. Our expert accountants have written this brief and informative guide which explains what the issue is!
Is your ad spend pushing you over the VAT limit?
Many UK business owners don’t realise that buying services from abroad – like Meta Ads, Google Ads, or overseas freelancers – can force them to register for VAT sooner than expected.
How it works:
When you buy services from a supplier based outside the UK (e.g., Meta in Ireland), they don’t charge you UK VAT. Instead, under the Reverse Charge Mechanism, you are treated as if you “sold” that service to yourself.
The Registration Trap:
HMRC requires you to add the value of these overseas purchases to your own UK sales when calculating your taxable turnover.
- Example: If your UK sales are £80,000 and you spend £15,000 on Facebook Ads, your “taxable turnover” for VAT purposes is actually £95,000.
- The Result: You have breached the £90,000 VAT threshold (effective from 1 April 2024) and must register with HMRC.
Why this matters:
Missing this “trap” can lead to retrospective registration, meaning HMRC could demand 20% VAT on all your past sales that you never actually charged to your customers.
Don’t get caught out. If you’re scaling your ads or hiring global talent, it’s time for a VAT health check.
We have noticed this is especially important for people working in marketing and advertising sectors who pay for their clients ads – purchases from overseas suppliers can add up really quickly!
Book yours now! – We’re AAT qualified accountants, based in Southampton and deal with reverse charge VAT on daily basis!
Also, did you know, if you are a UK VAT-registered business, you should inform your overseas supplier and provide your VAT number so that they can operate reverse charge mechanism correctly – they should not charge you any VAT but without having your valid VAT number, they are likely to apply VAT rates from the country they are based in!
Key Technical Details to Remember
- VAT Registration Threshold: As of 1 April 2024, the threshold is £90,000 on a rolling 12-month basis.
- Accounting Boxes: For VAT-registered businesses, reverse charge entries typically go in Box 1 (Output VAT) and Box 4 (Input VAT), making the net effect zero for most.
- Excluded Services: The reverse charge generally does not apply to things like rent, hotels, or transport