HMRC's Crackdown On Gifts To Social Media Influencers
Is VAT now always applicable?
Posted by Roger Eddowes on 08/06/2023 @ 8:00AM
HMRC is now turning its gaze towards companies that send free products or 'gifts' to social media influencers in exchange for publicity. The scrutiny is not just limited to the influencers themselves ...
In the face of HMRC's crackdown, influencers must also be aware of their tax obligations!
In the eyes of the HMRC, a 'gift' implies a voluntary, unconditional transfer of goods, with no return favour expected. Such gifts often escape Value Added Tax considerations unless their total cost exceeds £50 within a 12-month period to the same person.
If this threshold is breached, the business is expected to account for VAT on the cost price of each gift. However, HMRC is challenging this assumption in cases where companies gift goods to influencers, deeming them more than just simple business gifts.
"HMRC perceives that businesses are gaining a considerable commercial advantage!"
This perceived exchange of goods for services, even in the absence of a formal contract, is seen as a 'barter' transaction. In these instances, the goods given to the influencer are viewed as non-monetary considerations for advertising or promotional services provided by the influencer.
Thus, instead of levying VAT on the cost price of the gifts, HMRC values the barter transaction based on the standard retail selling price of the goods provided to the influencers. This valuation approach significantly escalates potential VAT liabilities for businesses gifting goods to influencers.
Dozens of UK retailers have already been contacted by HMRC concerning this matter, and more can anticipate being similarly approached. It appears that retailers, who were among the first to recognise and capitalise on the commercial potential of influencer marketing, are the primary focus of these inquiries.
"Meanwhile, influencers must also be aware of their tax obligations!"
Even when not under a contract, influencers may still be liable for taxes on 'gifts' if they endorse or use them publicly. The taxable amount generally corresponds to the market value of the gift or service received.
While businesses and influencers grapple with these new tax implications, it is clear that as influencer marketing continues to evolve, so too will the regulations and tax obligations surrounding it.
I believe it is prudent for businesses and influencers to stay abreast of HMRC's evolving stance.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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