Google Ads VAT and billing in the UK

If your business is in the UK, Google Ads bills you in a way that surprises a lot of owners: there’s usually no VAT line from Google, there’s a 2% fee you may not have noticed, and invoices don’t arrive by email. This page explains each part, using Google’s and HMRC’s own guidance.

We’re not tax advisers. If you’re unsure how to record Google Ads costs, ask your accountant.

Who bills you, and why there’s no VAT line

Google’s help says Google Ads accounts are served by Google Ireland Ltd, and that Google “can’t charge VAT if your billing address is in a country that’s not part of the European Union”. The UK is outside the EU, so Google doesn’t add UK VAT to most UK businesses’ bills.

For a VAT-registered business, this is a reverse charge purchase. HMRC’s guidance on the place of supply of services says that when a supplier outside the UK provides you with services, you account for the VAT yourself:

• the VAT due goes in box 1 of your VAT return,
• the same amount goes in box 4 as input tax, so for most businesses it nets to zero,
• the full value of the purchase goes in boxes 6 and 7.

HMRC also notes that services bought from abroad like this count towards the VAT registration threshold, even if you make no taxable sales yourself. If you spend a lot on ads and aren’t registered, it’s worth checking with your accountant.

Google’s help doesn’t say what happens for UK accounts set up without a VAT number, or set up as personal accounts. Check your own invoice to see what was charged.

The 2% UK DST fee

Since 1 November 2020, Google has added a “UK DST Fee” of 2% to the cost of ads served in the United Kingdom. It follows from the UK’s Digital Services Tax. Three things to know:

• It depends on where the ads are shown, not where your business is. Ads shown in the UK carry it even for a business based elsewhere.
• Google says surcharges like this are subject to taxes that apply in your country, such as VAT.
• Google doesn’t refund the fee on legitimate clicks and impressions.

The government says it will remove the Digital Services Tax once an international solution is in place, but gives no date. Google still lists the UK fee.

How you pay: postpay, not prepay

Google now calls its payment settings postpay, prepay and monthly invoicing. Prepay isn’t available in the UK, so most small businesses use postpay:

• Google charges you on the first day of the month, or earlier when your costs reach your payment threshold. The threshold can rise automatically as you spend more, so a busy month can mean several charges.
• You can pay with a Visa or Mastercard card (debit cards with those logos work too), a bank account by direct debit, or PayPal with a UK billing address in pounds.
• For direct debit, you accept a mandate, then confirm a small test deposit that arrives in 3 to 5 days. A payment can take up to five working days to go through.

Monthly invoicing (a line of credit, paid by bank transfer) is for larger advertisers. Google asks for a business registered for at least a year, an account in good standing for at least six months, and at least US$5,000 a month (or the local equivalent) in 3 of the last 12 months.

Where to find your invoices and statements

Google doesn’t post or email statements to postpay accounts. Download them yourself:

• Statements: Billing > Documents. Google is clear that “statements aren’t bills”: they’re a record of your charges and payments.
• Payment receipts: Billing > Summary, then open a payment.
• Monthly invoices (monthly invoicing accounts only): emailed, and also under Billing > Documents.

Google renames menus from time to time, so the labels may differ slightly in your account.

Pounds, or a different currency

Your account’s currency is set for good when the account is created. If you set it up in dollars by mistake, Google’s only fix is a new account in pounds.

Why a day can cost more than your daily budget

On any one day, Google can spend up to twice your average daily budget. Over a month it charges no more than 30.4 times the daily budget, and gives an overdelivery credit if it goes over. See why Google Ads spent more than your daily budget.

Sources

• Google Ads Help: Taxes and VAT, Jurisdiction-specific surcharges, Postpay, Payment settings, Payment methods, Bank account payments, Invoices and statements, Monthly invoicing, Currency, Daily budget.
• HMRC: VAT place of supply of services (Notice 741A), Digital Services Tax.