Following events over the past few years of which we are all painfully well aware such as recession and the increase in VAT rate, many small businesses have been reminded of the benefits of good old-fashioned printed marketing materials. One of the reasons for this is that a lot of printed materials remain zero rated for VAT if you know the in’s and out’s of the VAT rules.
There-in lies the problem, the guide lines are not exactly clear so it is all a bit of a mine field and I am pretty sure that even accountants and, indeed, the VAT people themselves end up scratching their heads over the finer details.
In fact, even researching it for the purposes of this article has left me with somewhat of a sore head!
The large part of printed marketing materials can be described as either Leaflets or Brochures and here’s where it gets really confusing Leaflets are NOT subjected to VAT whereas Brochures DO carry VAT.
How do you define a leaflet, well here’s what HMRC says leaflets are:
■ consist of a single sheet of paper not greater than international standard A4 in size (larger publications up to A2 size can be zero-rated provided that they are printed on both sides, folded down to A4 size or smaller and meet the other conditions)
■ are intended to be held in the hand for reading by individuals (rather than for hanging up for general display)
■ convey information
■ are complete (and not a part work)
■ are supplied in sufficient quantity (at least 50 copies) to permit general distribution
■ are printed on limp paper, and
■ will either be of an ephemeral nature (designed to be read a few times and then thrown away) or be designed to accompany some other product or service, for example an instruction leaflet.
Things like admission tickets, calendars, reference materials, discount vouchers and brochures printed on heavy or laminated paper or card will generally not meet the definition of a leaflet and will, therefore be subject to VAT.
Generally speaking, if it’s cheap, cheerful and designed to be thrown away after a short time, then there is no VAT to pay.
Something worth taking into consideration next time you are revising your marketing spend is that most printed marketing materials are zero-rated for VAT. So for example you may be spending a couple of thousand pounds + VAT to advertise yourself in a local magazine which may only go out to 35,000 homes. If you were to spend the same money VAT free on flyers you could be hitting around 90,000 homes. You don’t need to do the maths on the increased potential feedback, that’s 350+ possible leads compared to 900+ possible leads for the same money.
Depending on the nature of your business and your budget you can apply the same principle to bespoke brochures, booklets, directories, catalogues and magazines which are all usually zero-rated for VAT.
A multi paged material which is solely based on your business will have a bigger impact and far more positive response than advertising in a publication or on a website alongside other potential competitors.
Hopefully, you will find this information useful and it may go some way towards saving you a few pounds in your marketing budget and improving cashflow.