INFLUENCERS & THE TAX MAN
In 2017, the HMRC accounted for 27,000 Influencers earning revenue through being an Influencer. By 2020 this number is expected to rise to 100,000. As the Influencer marketing sector booms and many creators take the leap to transforming their hobby on the side to full-time work, we’re faced with the inevitable conversation around the M word. M O N E Y. And with money comes tax, one of two life certainties...
There has been a big discussion on how, or rather what, Influencers need to record as their income. With sponsored/paid-for content, where a monetary fee has been agreed, it’s fairly self-explanatory. However, when it comes to “payment in kind”, when products or experiences have been gifted in return for contracted deliverables, several questions are thrown up as to how exactly to declare this on a tax return. This is a notoriously murky area and one which the HMRC are trying themselves to get a grip on. No surprise then, we’re taking it on to demystify, clarify and explain how best to handle the intricacies of Influencer taxation.
So, we spoke to Krish at AIA Accountax to advise on what exactly needs declaring to foster best practice. No one wants to take on the tax man and certainly no one wants to be left with any hefty fines at the end of it; here’s our advice on how brands and Influencers can stay in his good books (no fully pun intended), clearing up any questions and making sure that come the end of the year, you know exactly what you’ve earned and what you owe.
As is the case with any form of monetary agreement, where actual money is offered in return for content, this must be filed appropriately with your yearly tax return. Whether or not you’ll be paying tax on it is dependent on the total revenue generated in that specific tax year, but this is straightforward income recorded as such.
Whether or not you are a full-time Influencer or still have an alternative stream of income, you need to register as self-employed and will be entitled to a tax-free Personal Allowance of £11,850 as a baseline (which will be deducted from your total, cumulative earnings).
Payment in Kind
Here’s where the waters get a little choppy, in part because lack of advertorial transparency has made it difficult to know where paid partnerships have been agreed and where organic content is present.
Consequently, knowing whether to declare a partnership as income has had its ambiguities. It’s been a three-sided effort to clean this up; with brands and Influencers better in the know (if not you can view the regulations here) and the ASA tightening the guidelines. Upon reading this article it will probably be easier to understand why the regulatory bodies currently view declarations on gifting-based projects and paid-for projects in the same way. In their eyes, if there has been an agreement for content production it should be #ad or #spon. What it means for tax though is, well, that it’s taxable.
If you have received any “payment in kind” for contracted deliverables, you need to declare the monetary value of this, as confirmed by the brand, in your yearly tax return. The value of this is to be determined by the cost to the provider (brand), similar to the way in which benefits in kind to employees are calculated under PAYE. You should refer to your agreement with the brand to verify this cost, and make sure that you are aware of it before signing, obtaining hard copy of this which you can refer to as evidence, should you require any. We’d suggest either the wholesale or real-product cost, rather than the retail value (RRP).
If no prior agreement of content has been discussed (i.e.: an Influencer is sent an item without expecting it) it falls into #gifted (or wording to that effect) instead of #ad / #spon. This will not have to be declared as income because there is no obligation to produce or deliver content. So the gifts you receive in your PO Box aren’t going to come under scrutiny and you’re free to talk about them as you wish, tax-free.
As an Influencer, part or full-time, you’re able to claim expenses for your daily work under this job title, which will in turn help to bring down your income and thus reduce the tax you are liable to pay. We thought it would be helpful to include here a rundown of what exactly you can put down as expenses and in some cases, you may be pleasantly surprised!
Website: your website is essentially your brand, so anything you use to run this can be claimed as an expense, such as hosting fees, editing software, images and paid social boosting.
Courses used to enhance your experience: any courses that you’ve consequently attended and/or completed as professional development can be claimed as tax. However, any courses responsible for establishing yourself in this profession or aiding with the set-up, cannot.
Equipment: any equipment that you use in your blogging, such as cameras, laptops, phones, even if purchased prior (within the past seven years) to you earning revenue through your blogging services, can be recorded as expenses. However, these can only be claimed once and will not be accepted as a yearly expense.
Working from home: if you are working from home for a substantial number of hours each week (more than 25), you are able to claim expenses on the amenities used. Fortunately, you don’t have to sit down working out the percentage of internet usage or telephone lines you’ve used, but rather can adjust it according to the HMRC’s simplified expenses guidance available here.
A percentage of your phone bills, based on your usage for blogging and social media, which we assume is easily gauged by the amount of time you spend on the applications themselves as recorded by your own device.
Travel to events and tickets for blogger events, which much like courses, are enhancing your professional development and securing you potential future work.
In short, this is an area of self-employment which though nobody really likes, is essential to get right. It’s also yet another area where, up until now, Influencers have been able to feign ignorance. However, the HMRC are looking at this closely now, so if you aren’t currently filing returns, we’d suggest you get ready to. We’re not entirely convinced that the HMRC, Influencers and brands really have it watertight, but put simply, it follows the same lines of advertorial declaration: if it’s an advert in any form, the income generated needs to be taxed.
But discussing tax also brings us to highlight the issues around paying bloggers in cold, hard cash, which has become an industry standard and rightly so. If you are a brand that’s never paid Influencers and insists on never paying, you’ll find you’ll come up against resistance. Why? If you gift a holiday to an Influencer in return for X and Y deliverables, they still have to declare the value of this holiday as income earned, but without the actual monetary funds to subtract the tax from. Do the math’s, literally. This is particularly relevant to the travel sector, who have so far been able to “host” Influencers on the pretense of them providing locations for shoots. If those “locations” are asking for anything in return, the above rules apply.
Now, that’s not to say that when working with Influencers it’s all about having budget to throw around; from its PR beginnings, Influencer marketing is a wonderful concoction of data specifics and nurturing relationships to achieve that crucial balance between sponsored and organic content, paid and earned media. The last thing we want is all channels following Facebook’s example and turning into ad platforms with inescapable targeted content because ultimately, the audiences that hold both a platform and creator’s value will be lost. The best collaborations are the ones that succeed for the brand and Influencer on various key performance indicators (KPIs), maintaining brand integrity alongside increasing awareness and sales.