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Paying Tax as a Social Media Influencer

HMRC tax crackdown on gifts to Social Media Influencers

Once the realm of ‘D-list’ celebrities and ‘wannabes’, Social Media Influencer is now considered by many as a lucrative career option. It’s even been added as a potential career for your Sims in EA’s hit RPG The Sims 4!

And as such, this fast moving industry is very much on HMRC’s radar.

‘Gifts’ to Social Media Influencers in  return for content can come in a number of forms; money, physical products or experiences. Where receipts are in the form of cash, these are clearly taxable earnings  and should be declared to HMRC via self assessment. But what if instead of cash, you are ‘paid’ with gifts like designer bags or a luxury holiday?

Gifts as payment

Where there is a contract specifying the required output (eg a favourable mention on an Instagram post), the ‘gift’ would be seen as payment-in-kind for advertising and should be declared as income. However, there is a grey area surrounding gifts where there is no obligation to share promotional content. A brand may send an influencer a gift in the hope that they will mention them or their product without any formal agreement to do so. The question then is whether the recipient is carrying on a trade.

For influencers who carry on promotional activity as a sole trader, the receipt of free items or gifts  is likely to be seen by HMRC as a barter transaction, or consideration. Therefore it should be declared as income.

In simple terms, if you are creating content with a view to making a profit, this is considered trading and the earnings (be they cash or gifts) are taxable. The amount of income to be recognised should be based on the cash value of the gift.

As the opportunities for this new industry continue to grow, it should come as no surprise that HMRC are keen to remind Social Media Influencers of their reporting obligations. Clear record-keeping and proper reporting are key if you want to avoid nasty fines.

We hope that you’ve found this article helpful. If you require more guidance on this topic or have any other tax queries please get in touch, our experienced team would be happy to help.

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