20th March 2023HMRC nudge letters: advice to influencers
This month, HMRC has written to thousands of influencers who it suspects have not paid the right taxes for money earned online – this is part of its latest attempts to keep pace with the growing UK digital economy.
Andrew Subramaniam, Head of Media at HW Fisher explains:
“All influencers who make a profit from online activity must declare to HMRC if their income is more than £1,000. This includes influencers who have a large following, and receive gifts in exchange for promotion across social channels.”
Here’s some advice for influencers when it comes to managing finances.
- Beware of the “freebies” or “gifting”
Despite the name, freebies might not be as straightforward a transaction as you think. If you receive an item as a gift from a company and there is a contractual obligation to post about it, HMRC will seek to tax you on the market value of the item which, depending on the brand, could really mount up. Clothing and accessories are a particular area of focus for brands and influencers, but to treat this as an allowable expense you have to be able to evidence that this is for on-screen use only. Which means you could run into trouble if you are seen elsewhere in these items!
- Get the right team in place
Most influencers are great at creating content but have little or no idea about the compliance minefield related to their activities and this is where working with a good team of financial experts and professionals will set you up for success. An accountant can make sure you have your taxes in order, a financial adviser will help your money work harder for you, and a lawyer can make sure you are aware of your legal obligations and check contracts to make sure you are aware of everything you are signing up for. It is a real team effort, and everyone needs to work collectively to achieve the client’s goals.
- Operating as a Limited Company
While operating as a sole trader is relatively straightforward, many influencers do operate via limited companies. While the paperwork related to operating a company is significantly more than that for a sole trader, operating as a company offers the influencer protection in the form of limited liability. This means that the company acts as a barrier between what the influencer owns personally and what is in the company. Professional advice should be sought here before deciding on which route to go down as no two cases are alike.
If you want to discuss your circumstances, please get in touch.