Customs & Excise have recently announced that placing direct advertisements in newspapers, magazines, etc. is not eligible for VAT recovery under the contracted-out services rules. Although Customs insist that this is simply clarification of existing rules, it will be news to most NHS organisations that have always recovered VAT on these services.
Customs have however stated that the provision of advertising is still eligible for recovery under item 57 of the COS headings if provided as part of a package of services by a third party.
To clarify, we have confirmed with Customs that using the services of an advertising agency does still qualify for VAT recovery.