While social media influencing is a relatively new profession, at Champion Accountants we come across recurring questions from influencers who want to pay their fair share of tax.
High on the list of queries are the issues surrounding gifts, freebies and samples sent to influencers, and whether tax is payable on these items.
Frustratingly, the answer is: sometimes.
Here are the key points to consider if you’re an influencer filing a self-assessment tax return after receiving gifts.
1 . Why did the brand send you the item?
If you were sent a product with an agreement that you promote it on any of your online channels, it’s highly likely that HMRC would want you to pay tax on the item’s wholesale or real-product value (not the RRP). This is known as a ‘barter transaction’; you give a service to a brand, and in return you receive a product. The product forms some, or all, of the payment to you.
This is a bitter pill to swallow if no money has exchanged hands. As an influencer, you could be faced with tax to pay without ever receiving any money to cover it.
If you received an item out of the blue, which you didn’t request and were under no obligation to post about, you generally wouldn’t be expected to pay tax on the item. But there are exceptions. Post about the item, and HMRC might take the view that you’ve entered into a barter transaction. Go on to strike a paid sponsorship deal with the brand, and the odds of this gift being viewed as a true ‘freebie’ drop even more.
But it’s not entirely black and white. The next question plays a part in this decision, too.
2. Are you a trading or non-trading influencer?
There are no hard and fast rules for determining whether you are a trading or non-trading influencer. In a nutshell, however, if you live off your influencer income, or it supports your lifestyle, you’re likely to be viewed as trading. If your lifestyle and daily habits are built around your influencer role and you market yourself as an influencer, you’re likely to be viewed as trading.
If you’re a trading influencer, HMRC will be looking for their share of your profits, whether they come in the form of gifts or cash.
3. Could I swap this item for money?
There is some relief for influencers here. If a gift is non-transferable (it couldn’t ever be swapped for money) you generally won’t be taxed on it. A non-transferable hotel stay, beauty treatment, or coaching session might fall under this category.
Social media influencing is an ever-evolving industry. At Champion Accountants we pride ourselves on understanding the field, working hard to stay abreast of rules, regulations, and best practice. We understand that it can be difficult to work with confidence when rules are unclear and open to interpretation, especially as most of those in the industry are hard-working creatives, not tax experts or number crunchers.
And while the above might make for sobering reading, sound financial advice and tax planning elsewhere can counteract the potential impact of taxable gifts.
Get in touch to talk to an expert. We’ll identify what’s taxable, what’s not, and give you the best advice possible so that you can get back to influencing with confidence.
To find out more, contact David Herd on firstname.lastname@example.org or 0161 703 2500.