Not a day goes by without headlines surrounding social media influencers and the ever-evolving ways they generate significant income from their online audiences. It’s a fast moving, transformative industry, one that develops so rapidly even HMRC are finding it challenging to keep pace. Yet as the sector grows, HMRC are becoming increasingly aware of it’s potential and, given the complexity of influencer income streams, how easily earnings can be innocently undeclared.
HMRC’s Fraud Investigation Specialists have begun examining departmental data to assess whether the figures reported on tax returns align with the lifestyle influencers present online. This could include checking whether high-profile displays of wealth might simply be marketing exaggeration or whether they indicate underdeclared income or categorical omissions.
What makes influencer income so complex from a tax perspective?
The technical tax issues surrounding influencer activity are significant. Determining which activities amount to trade or the provision of a service is far from straightforward. Add to this, the value of gifted products, expense paid trips, cross platform earnings, sponsorships and countless other revenue sources, and the picture becomes even more complex.
Using online intelligence and third-party data, HMRC builds detailed profiles of individuals lifestyles, considering factors such as the ownership of high-value property, luxury vehicles, frequent international travel, information provided directly by social media platforms and other indicators of wealth. It can often be several months before this results in a familiar brown envelope arriving through your letterbox: the beginning of a HMRC enquiry.
HMRC’s intention is not to catch you out, but to ensure your tax position is accurate. However, for influencers and content creators, the rules are intricate, and specialist support is increasingly essential.
For guidance on the correct technical treatment of your income, assistance with personal or company tax or help making disclosures where necessary, get in touch with Crowe’s Tax Disputes and Investigations team.