Google Adsense (Irish sales) and VAT FRS

[selectstar]

For a few years, I have been running a small Ltd company dealing with Software Development. However, recently I've started having a higher income with advertisements on a few content-based websites. The revenue is generated with Google Adsense, which pays out monthly.

As my software company is registered with VAT FRS, I wonder if this might not be convenient as the monthly invoices that Google sends are from their company based in Ireland. There is no VAT on the invoices.

I am not sure how this might work with VAT FRS as with this scheme, any standard-rated, reduced-rated, zero-rated and exempt sales need to be included in the VAT return. However, with FRS, any sales that are outside the scope of VAT can be left out.
Looking into my accounting software, it seems that they are applying the latter case to Google's invoice. i.e. VAT for these invoices isn't calculated in the "VAT due on sales and other outputs" field.

Does anyone know if this is correct?

Eventually, I would consider creating a separate Ltd company. This might be a good idea as the revenue from Adsense seems to be higher than that of the software development services.
However, I guess I cannot have the 2nd Ltd owned by my current company as with FRS it will go against the rule of not having a business closely associated with another business. So I am hoping I can be the director of the 2nd company without causing any issues.

[ladymuck]

It's most likely reverse charge VAT on an Irish invoice.

[TheCyclingProgrammer]

It's most likely reverse charge VAT on an Irish invoice.

Reverse charge relates to purchases, but OP is talking about income. I assume Google are self-billing on OPs behalf.

It is very likely that these are treated as supplies to Google Ireland which would be outside the scope of UK VAT, therefore VAT does not need to be accounted for. If you’re in the FRS it doesn’t even appear on your VAT return as box 6 excludes out of scope supplies on the FRS.

[ladymuck]

Reverse charge relates to purchases, but OP is talking about income. I assume Google are self-billing on OPs behalf.

D'oh. For some reason, despite the obvious clues, I did still end up thinking it was paying for Adsense

[selectstar]

D'oh. For some reason, despite the obvious clues, I did still end up thinking it was paying for Adsense

It can be confusing as there are two Google services with similar names and that work in opposite ways: Adsense and Adwords. People pay Adwords to advertise on Google's network, while with Adsense pays publishers to allow Adwords ads to display on their websites/apps.

[selectstar]

Reverse charge relates to purchases, but OP is talking about income. I assume Google are self-billing on OPs behalf.

It is very likely that these are treated as supplies to Google Ireland which would be outside the scope of UK VAT, therefore VAT does not need to be accounted for. If you’re in the FRS it doesn’t even appear on your VAT return as box 6 excludes out of scope supplies on the FRS.

I've just found this:

The services provided are subject to the reverse charge mechanism and so VAT is to be accounted for by the recipient, Google Ireland, per Article 196 of Council Directive 2006/112/EC.

In that case it should be all good.
Does anyone have advice regarding this very different type of business income compared to what the business was originally meant to do:

• 62012 - Business and domestic software development
• 62020 - Information technology consultancy activities