VAT and corporation tax for UK lead generation companies explained

What to take away

How HMRC treats a UK lead generation company for VAT and corporation tax

If you run or take part in a lead generation network or marketplace, the same tax rules apply to the platform, the network operator and the member firms that trade leads through it.

Each entity needs to look at the supply it makes: access to the marketplace, a per-lead sale, a subscription, or a data licence. The VAT and corporation tax treatment follows that supply, not the label on the platform.

HMRC starts from what you actually sell. A lead generation company sells an introduction, a qualified enquiry, or access to a marketplace of buyers. That is a supply of services, not a supply of goods, which shapes everything that follows.

Most lead networks in the United Kingdom are trading businesses for tax purposes. They buy traffic, data, software and sales effort, then sell leads or subscriptions to clients. HMRC taxes the profit on that trade under corporation tax and the turnover under VAT.

Two taxes, two different bases. VAT looks at turnover and the value of each supply. Corporation tax looks at profit after allowable expenses, capital allowances and reliefs. A company can be VAT registered and still make a loss for corporation tax.

VAT is charged under the Value Added Tax Act 1994 on the supply of goods or services in the United Kingdom, and the Corporation Tax Act 2009 charges corporation tax on the profits of companies.

HMRC is the authority for both. Its guidance pages are the starting point for rates, deadlines and penalties, and its online account is where most filings now happen. The department publishes the rules at HM Revenue & Customs.

A lead network selling to businesses is usually making business-to-business supplies. That matters for the reverse charge on some cross-border services and for how invoices must read. It does not remove VAT from a standard-rated sale to a UK business.

Consumers are different. If you sell leads or subscriptions to sole traders acting outside their business, or to individuals, the consumer rules and the advertising rules sit alongside the tax rules.

Keep the tax treatment of each revenue line written down. Subscription fees, per-lead charges, exclusivity premiums and data licensing can each sit in a different VAT position. Mixing them on one invoice invites questions.

VAT registration thresholds and when a lead network must register

The threshold is a fixed figure; only the turnover test rolls. GOV.UK sets out when you must register for VAT: when total taxable turnover for the last 12 months goes over £90,000, or when you expect it to go over £90,000 in the next 30 days. Below £90,000 you can still register voluntarily.

The test is taxable turnover over a rolling 12 month period, and HMRC sets out the mechanics at Register for VAT: When to register for VAT - GOV.UK.

Once taxable turnover for the previous 12 months goes over the threshold, you must register. The clock starts at the end of the month in which you breached it, and HMRC expects registration within 30 days of that point. Most businesses register online through HMRC's register for VAT service; the paper route is the VAT1 registration form, requested from HMRC.

Forward look matters too. If you expect to breach the threshold in the next 30 days alone, you must register before the breach happens. Lead networks with spiky campaign revenue fall into this trap more often than steady subscription businesses.

What counts towards the threshold? Standard-rated and reduced-rated sales, zero-rated sales, and most supplies made overseas that would be taxable if made in the UK. Exempt sales generally do not count.

What does not count? Sales of capital assets, and supplies outside the scope of UK VAT. Some overseas sales of services can be outside the scope, which is why the calculation is rarely as simple as total revenue.

Watch the rolling window. A strong quarter can push you over even if the annual total looks comfortable. Build the check into your monthly management accounts rather than an annual panic. It belongs in the same discipline as building a budget that survives the tax boundary, where tax is treated as a cost line from the start.

If you run several trading names or a group, each entity has its own threshold unless you register as a VAT group. Group registration can simplify internal charges but it also changes who is liable.

The reverse charge on bought services and overseas lead suppliers

The reverse charge is the rule that makes the buyer, not the seller, account for VAT on certain bought-in services. It applies most often to services bought from suppliers outside the UK, and to some construction and similar domestic supplies.

For a lead network, the common trigger is an overseas supplier. Data providers, media buying platforms, call tracking tools and offshore lead vendors often sit outside the UK. When they do, the reverse charge usually applies.

How it works in practice. You receive an invoice with no VAT. You then account for output VAT on the purchase in your own return, and claim the same amount back as input VAT where you have full recovery. The net cash effect is often nil, but the entries are not.

Do not skip the entries because the cash effect is nil. The value still counts towards your taxable turnover for the registration threshold, and the purchase still needs a valid VAT number and evidence of the supplier's status.

Check where the supplier belongs. The test is usually the supplier's business establishment, not the currency on the invoice or the location of a server. A UK-established supplier charges UK VAT even if the team sits abroad.

Get the invoice wording right. Your own invoices to overseas business customers may need a reverse charge note, and your bookkeeping should show the tax point, the rate and the VAT number of the customer.

Errors here are common and cheap to fix early. A misclassified overseas purchase can distort your turnover test, your input VAT claim and your corporation tax deduction all at once. Separate the flows in your ledger, keeping cash, VAT and labour in distinct accounts so a nil net effect never hides a real entry.

If your supplier mix is complex, a written policy beats memory. List each supplier, its country, the service type and the VAT treatment, then review it when contracts renew.

Margin schemes and whether they fit lead generation billing models

Margin schemes let a business account for VAT on the margin between buying and selling price rather than on the full sale value. The best known is the margin scheme for second-hand goods, and there are versions for tour operators and some other trades.

Lead generation rarely qualifies. A lead is not tangible goods bought and resold. It is a service, and the margin scheme for goods does not reach services. HMRC's rates guidance sets out how services are normally rated at VAT rates on different goods and services - GOV.UK.

Where people get confused is with the word margin. Selling a lead at a margin over acquisition cost is a commercial margin, not a VAT margin scheme. VAT is still due on the full consideration for a standard-rated supply.

That distinction matters when you compare b2b lead marketplace fees, because the headline price and the tax-inclusive cost are not the same number.

The closest fit is the tour operators margin scheme, and it does not apply to lead networks. It applies to businesses buying and reselling travel services as principal. That is not what a lead marketplace does.

There are legitimate ways to reduce VAT exposure, but they are structural, not cosmetic. Selling to overseas business customers can move a supply outside the scope. Selling exempt financial introductions can change the position, though partial exemption then follows.

Partial exemption is the real complexity. If you make both taxable and exempt supplies, you cannot recover all input VAT. You must run the standard method or agree a special method with HMRC, and the calculations repeat every VAT year.

Financial promotions and credit broking sit near regulated ground. Introductions to lenders or insurers can be exempt, which sounds attractive until partial exemption erodes your recovery on the costs that generate them.

If someone offers a margin scheme as a way to cut VAT on lead sales, ask for the legal basis in writing. In most cases the honest answer is that there is none.

Working out corporation tax on lead generation profits

Corporation tax is charged on your trading profits, not your turnover. The starting point is profit before tax in your accounts, adjusted for items HMRC allows or disallows. The rates and limits are published at Corporation Tax: Overview - GOV.UK.

Start with revenue. Include per-lead charges, subscription fees, listing fees, exclusivity payments and any data licensing income. Accruals matter: recognise revenue when the service is delivered, not when the cash lands.

Then deduct allowable costs. Media spend, data purchases, platform fees, hosting and staff costs normally qualify, along with contractor payments and software subscriptions. Professional fees and bad debts usually qualify as well.

Disallowables are where the adjustments bite. Entertaining clients, most fines and penalties, and depreciation charged in the accounts are added back. Capital items go through capital allowances instead.

Capital allowances cover equipment, some software and qualifying fit-out costs. The annual investment allowance lets you deduct most qualifying plant and machinery in the year of purchase, which suits growing networks buying servers or office kit.

Trading losses can usually be carried forward against future profits of the same trade, or set against other profits in some circumstances. The rules differ for losses after a change of ownership, so take advice before restructuring.

HMRC's guidance on Marginal Relief for Corporation Tax gives the rates: 19% for taxable profits below £50,000 (the small profits rate) and 25% for taxable profits above £250,000 (the main rate). Between £50,000 and £250,000, marginal relief gives a gradual increase from the small profits rate to the main rate. Associated companies divide the limits. If your company has 3 other associated companies, the limits are divided by 4, so the lower limit becomes £12,500 and the upper limit £62,500. Shorter accounting periods reduce them proportionately too, which can push a profitable network into the main rate sooner than expected.

Keep a tax adjustment schedule year on year. It shows how accounting profit becomes taxable profit, and it is the first thing an HMRC enquiry will ask for.

Directors' filings, Self Assessment and Companies House records

Every UK company must file annual accounts with Companies House and a company tax return with HMRC. These are separate filings with separate deadlines, and missing either brings automatic penalties. The accounts route is set out at File your company's annual accounts with Companies House - GOV.UK.

Accounts are due at Companies House nine months after the accounting reference date for a private company. The company tax return, form CT600, is due 12 months after the end of the accounting period, though the tax itself is usually payable earlier.

Corporation tax payment dates depend on profits. Smaller companies generally pay nine months and one day after the period ends. Larger companies pay in quarterly instalments, which catches growing lead networks by surprise.

Directors often need to file a Self Assessment return as well. That covers director's loan account movements, dividends, benefits in kind and any other income not taxed through payroll.

Dividends need enough distributable profit and the right paperwork. A dividend voted without profits on the balance sheet is a loan from the company, with tax consequences for both sides.

Director's loans over the threshold attract a temporary tax charge on the company, refundable when the loan is repaid within the allowed window. Track the loan account monthly, not at year end.

Statutory records matter too. Registers of members, directors and people with significant control must be kept and updated. Companies House filings are public, so accuracy protects the company's reputation with clients and banks.

The ICO, the FCA and the ASA sit outside tax but shape the same business. Data consent, financial promotions and advertising claims all carry regulatory risk that no tax filing cures. Some of that risk sits in costs outside the headline fee, where compliance work is real budget rather than paperwork.

A worked VAT and corporation tax example for a lead network

Here is a worked example. Numbers are illustrative, and you should apply current rates and thresholds to your own figures.

Assume a Leeds-based lead network sells qualified enquiries to UK businesses and buys data and media from a supplier in Ireland and a platform in the United States. It has one director and four staff.

Step by step:

The illustration in numbers, using round figures:

The VAT side. Turnover is far above the registration threshold, so the network must be registered. The UK sales carry output VAT at the standard VAT rate of 20%, which on £480,000 of sales is 96,000 charged on top to customers. The overseas purchases carry reverse charge entries. If all supplies are taxable, input VAT is recovered in full and the net payment is broadly output tax on UK sales less input tax on UK purchases.

The corporation tax side. Taxable profit is £135,000 after adjustments, which sits between the lower and upper limits set out above, so the company pays more than the small profits rate and less than the main rate. At the main rate alone the charge would be 33,750; HMRC's marginal relief calculator then works out the reduction for the accounting period, and the result goes on the CT600. If profits grow past the upper limit, quarterly instalments may apply next year.

The cash lesson. VAT collected is not your money. Keep it in a separate account so the quarterly bill never competes with payroll.

A second lesson on timing. Reverse charge purchases inflate both sides of the VAT return without touching cash, but they still count towards the registration test. Networks that ignore this register late.

A third lesson on structure. If the network later sells exempt introductions alongside taxable leads, partial exemption starts to erode recovery. Model that before signing the contract, not after. It is also worth revisiting your lead network pricing models so the VAT position of each unit is clear.

Checklist before the year end:

Common questions