In a world dominated by digital, it’s hard to avoid talk of influencers and how much some of them can earn – in fact, influencing is big business.
Head of taxation Andrew Diver takes a look at how influencers could fall foul of HMRC.
What is an influencer?
It’s someone with a substantial social media or other online following who is considered to be able to influence their audience to act in a certain way, often to purchase. Influencers are used by brands to help them promote their products and increase their following.
They have a huge reach, especially when you consider that there are around four billion people using social media worldwide.
The taxation of online influencers is now an area that HMRC is looking into very carefully.
A targeted campaign was recently launched, with many social media influencers or others with digital earnings receiving letters from HMRC. These could indicate that the recipient may not have declared all their income and HMRC might request a certificate of tax position to be submitted in 30 days.
HMRC regularly targets sectors of the economy such as, for example, the construction industry or the income of TV presenters. Now digital influencers have come under their gaze.
Is tax payable on influencer earnings?
In short, yes. Influencers must declare their earnings to HMRC like any other self-employed person. They are entitled to the tax-free allowance of £12,570 – but even those earning below the threshold still have to file a self-assessment tax return, so all influencers, regardless of earnings must declare what they’re making.
How is an influencer’s income defined?
Sometimes influencers are paid with something other than cash, such as with products or services so it can become difficult to keep track. This is known by HMRC as a ‘payment in kind’ and can still be liable for tax so influencers must tread carefully.
For example, if you’re gifted a luxury all-inclusive holiday, you might be liable to tax on the cash equivalent.
The rules on payments in kind are likely to affect only the biggest influencers but it’s worth checking, as this kind of activity can be deemed as trading as comes with liabilities.
Not all influencers are deemed as traders, but those who consider it their main source of income and who arrange their lives and activities around earning a living in this way creating social media posts with commercial value, will be considered traders.
How can influencers play it safe
It’s best to secure written contracts with any brands, making it clear what the nature of the influencer relationship is. This means you have good record keeping and can easily provide evidence of your earnings to HMRC should they request it. Keeping things clear and recorded is key.
Remember, influencers can still claim expenses in the usual way, including for things such as equipment and travel expenses.
This is an area which is currently being investigated closely by HMRC. If you are unsure about paying tax as an influencer Beatons can happily advise.
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