Costs and pricing
Retail media budget guide for England: how 20% VAT, the reverse charge and the ICO fee change a quote
A retail media budget guide for England: what VAT, the overseas reverse charge and ICO fees of £52, £78 or £3,763 add to a quote, with a worked illustrative budget.
What to take away
- Retail media rates come from networks and agencies, so the media and fee lines stay "to be quoted" until a supplier names them.
- VAT at 20% applies to a UK supplier's invoice, and the reverse charge applies to most business services bought from outside the UK.
- If you can reclaim input tax in full, VAT is not a cost. If you make exempt supplies, it is.
- The ICO data protection fee is £52, £78 or £3,763 depending on size.
- An illustrative budget below shows how the lines add up.
Which cost lines can be sourced
A retail media budget has lines of two kinds. Some are set by public bodies and can be sourced. Others are set by suppliers and must be quoted.
| Cost line | Status | Source or action |
|---|---|---|
| Media spend | Quote | Network or self-serve platform |
| Agency fee | Quote | See agency fees |
| Creative and tools | Quote | Supplier quotes |
| VAT on a UK supplier | 20% | GOV.UK VAT rates |
| VAT on an overseas supplier | Reverse charge | HMRC VAT Notice 741A |
| ICO data protection fee | £52, £78 or £3,763 | ICO guide to the fee |
For the choice between buying direct and through a partner, compare self-serve and managed set-ups before you ask for quotes.
VAT: when it is a cost and when it is not
The standard VAT rate is 20%. VAT charged to you on your business purchases is your input tax, which you can normally reclaim if you make taxable supplies.
Some supplies are exempt from VAT, which means the person making the supply cannot normally recover any of the VAT on their own expenses. A retailer in that position carries VAT on media as a real cost.
Where a UK business buys advertising services from a supplier outside the UK, the place of supply rules usually put the supply in the UK. The reverse charge applies to almost all B2B supplies of services except exempt supplies, so you account for the VAT yourself.
If you can attribute the input tax due under the reverse charge to your taxable supplies, and so can reclaim it in full, the reverse charge has no net cost to you. If you cannot, you pay VAT on the supply at the UK rate.
Ask each network whether it invoices from the UK. The network comparison article lists the options, and the answer changes the VAT line.
The ICO fee for advertisers that use shopper data
Under the Data Protection (Charges and Information) Regulations 2018, organisations including sole traders that use personal information need to pay a data protection fee, unless they are exempt. The ICO fee guide sets three tiers.
Tier 1 applies to a maximum turnover of £632,000 or no more than 10 members of staff, and the fee is £52. Tier 2 is for a maximum turnover of £36 million or no more than 250 members of staff, and the fee is £78. Anyone else pays the tier 3 fee of £3,763.
Paying by direct debit gives an automatic discount of £5.
Example: one campaign budget
This is illustrative arithmetic. The media, agency and creative amounts are invented placeholders to be replaced by quotes, while VAT uses the 20% rate.
| Line | Amount | Basis |
|---|---|---|
| Media | £10,000 | Placeholder |
| Agency fee | £1,200 | Placeholder, 12% of media |
| Creative | £800 | Placeholder |
| Total before VAT | £12,000 | Sum of the three lines |
| VAT at 20% | £2,400 | £12,000 times 20% |
| Total if VAT is not recoverable | £14,400 | £12,000 plus £2,400 |
| Net cost if VAT is fully recoverable | £12,000 | Input tax reclaimed |
The VAT line moves the real cost by £2,400 on a £12,000 budget. That swing is larger than most agency fee negotiations, so settle the VAT position first.
The same budget with an overseas supplier
This is illustrative arithmetic on the same £12,000. The overseas network invoices £12,000 with no UK VAT. A UK business buying a B2B service from outside the UK accounts for VAT under the reverse charge, here £2,400 at 20%.
| Position | VAT accounted for | VAT reclaimed | Net cost |
|---|---|---|---|
| Taxable business, input tax fully recoverable | £2,400 | £2,400 | £12,000 |
| Exempt business, input tax not recoverable | £2,400 | £0 | £14,400 |
The exempt business ends up where it would be with a UK supplier, which is the intended effect of the reverse charge.
Add the ICO fee as a yearly line: £78 for a tier 2 organisation, or £73 after the direct debit discount.
Budget method
- List every line and mark it Quote, Sourced or Placeholder.
- Replace each Quote with a written supplier figure and date it.
- Settle the VAT treatment with your accountant using the rules above.
- Add the ICO fee if you use personal information.
- Review with the budget template and the hidden costs list.
Compare how suppliers charge before you sign. The pricing models article sets out the usual structures.
Checklist
- Every line labelled Quote, Sourced or Placeholder.
- VAT position settled before comparing quotes.
- Supplier location recorded for the reverse charge.
- ICO fee tier checked.
- Quotes dated, with the person who gave them.
Common questions
Where do media and agency prices come from?
From a written network or agency quote. The example above uses placeholders for those lines and marks them as such, while VAT and the ICO fee use the sourced figures.
Do I pay VAT on retail media?
VAT at the standard 20% rate applies to taxable services from a UK supplier. Whether it is a cost depends on whether you can reclaim it as input tax.
Do I need to pay the ICO fee?
Organisations that use personal information, including sole traders, need to pay a data protection fee unless they are exempt. The tier depends on turnover or staff numbers.
In this guide
- Retail media costs: record the quotation, billing unit and VAT position before adding anything upRetail media cost evidence for England buyers: record dated quotations, billing units, service scope and VAT uncertainty before calculating a defensible total.
- Retail media pricing: questions to put to a seller before you accept a rateRetail media pricing models start with one question: what does the seller bill on? Ask it for clicks, impressions, share of spend and fixed charges.
- Retail media budget template: an auditable blank ledgerRetail media budget template for England: a blank ledger for cost inputs, evidence and event metrics, keeping unknown prices and VAT marked UNKNOWN.
- Retail media return on investment, with attribution labelled as allocationRetail media return on investment for England separates recorded sales, attribution, causal contribution and projections without inventing costs or results.
- Account fees, permission work and VAT: the retail media costs that surface laterRetail media hidden-cost checks use a dated non-ranked method to investigate account fees, privacy work, security assurance and VAT without assumed charges.
