- Do I have to pay tax on online income?
- How to invoice for Google AdSense income in your Accounts
Do you invoice for Google Adsense income?
Being a blogger, Internet Marketer or Affiliate Marketer that receives income from Google AdSense clicks is not like a standard bricks and mortar business.
You don’t buy materials, build them into something and sell products to lots of customers. Instead you provide a platform, your blog, for Google to advertise other people’s products and services.
You receive an income from your visitors clicking on the links or for displaying large numbers of impressions of those advertisements. So technically you are receiving a payment for services rendered, those being the supply of the advertising platform.
So when it comes to keeping your business accounts, the question is how do you account for this income? Is it classed as a sale? Do you have to create an invoice or a sales receipt for it? And if so, what do you put on the invoice?
If you are setup as a sole trader (or any other business type for that matter) and you have websites generating income via Google AdSense, then you need to record it in your business accounts. Depending on your business model, Google AdSense might even be your only source of income.
If you are not keeping accounts, or you think you don’t need to, think again. Those payments from Google are electronic transfers so there is a record of that income in your bank account. If your tax service notices this and you are not declaring this income, they will come after you looking for unpaid tax, and potentially a fine as well.
Getting back to your Adsense payments from Google, in your accounts package you can create an Invoice or a Sales Receipt for the Google AdSense income.
Either of these would work, but a Sales Receipt is a one-step process where you record the details of the payment received for services rendered at the time of the sale. An Invoice is a two step process when you first create the invoice for services rendered and then mark the Invoice as paid.
On your Sales Receipt or Invoice, record the ‘Quantity’ or ‘Number of Units’ as either the number of impressions or the number of clicks over the time period.
The ‘Total’ will be the amount you received from Google.
The ‘Unit Price’ will be the ‘Total’ divided by the ‘Quantity’. If you are using a software package it may calculate this for you.
You can send this Invoice or Sales Receipt to Google if you wish, I am sure they will be very impressed to receive it! But most people who are not registered for VAT simply file it away with their business paperwork.
The rules are different if you are registered for VAT where I believe you must send it to Google.
However you only need to register for VAT if your business has a VAT taxable annual turnover greater than £82,000. If you are getting anywhere near this figure then well done! Your business is obviously booming. But it is time you spoke to your accountant and your local tax office to get the nitty gritty detail of your responsibilities in regards to VAT.
Note: I am not a tax specialist or an accountant. These suggestions are based on a few hours trawling the internet and compiling a general consensus of opinion, or best practice, for how you should account for your Google AdSense income. Please speak to your accountant and / or your local tax office to confirm exactly how you should handle your accounts. This is especially important if your business is registered for VAT as there are different rules for handling VAT depending on which VAT scheme you are on, eg, standard VAT or Flat Rate Scheme.