The taxation of influencers

When does your company need to submit its tax return?

Corporation tax returns should be submitted to HMRC within 12 months of the end of a company’s accounting period. The deadline differs from the Companies House filing date for the company’s accounts, which is generally nine months following the end of the accounting period.

In addition to the above, where a company’s accounting period exceeds 12 months, HMRC require the company to submit two tax returns for the following periods:

• 12 months following the end of the accounting period and
• the period of account to the accounting period end date.

Each tax return would be due 12 months from the end of the accounting period.

When does your company need to pay its corporation tax?

Depending on the level of profits in the year, the corporation tax payment deadline can vary.

For companies with augmented profits up to £1.5 million, payment should be made nine months and one day after the end of the accounting period. Where a company has an accounting period exceeding 12 months, it will have two separate payment deadlines.

or companies with augmented profits exceeding £1.5 million, corporation tax must be paid by instalments.

Consider the implications of tax residency

With the often nomadic lifestyle of influencers and content creators, the residency position of an individual can have implications for a company.

Generally, a company is resident in the UK if it is UK-incorporated or centrally managed and controlled in the UK. Where a director of an often-single director company is moving around the world, there are two potential risks for the company.

1. The company becomes a dual tax resident.
2. Creating a permanent establishment in another jurisdiction.

Each will create additional administrative burdens for the company, and so it is important that professional advice is sought when going abroad to work on a project or permanently moving abroad.

Consider close company rules

A close company is a company which is resident in the UK and controlled by either five or fewer participators or any number of directors who are also shareholders. In the case of companies run by influencers, these will often be single director companies or ‘owner-managed’ companies as they are commonly known.

A common pitfall for owner-managed companies arises where directors spend company funds on personal expenses. This is often through the use of a company credit card and will create an overdrawn director’s loan account.

Where an overdrawn director’s loan account remains at the end of the accounting period and is not paid back by the company’s corporation tax payment date, HMRC require the company to pay a tax known as s.455 tax, which is charged at 33.75% of the outstanding balance.

This is a common area that HMRC are challenging owner-managed companies on, and so proper advice and management of the situation should be sought.

Consider your sources of funds

If you make a loan to your company as a shareholder, corporation tax is not due on the loan.

However, if you charge the company interest (which will need to be included on your personal tax return), this is a deductible expense for the company and there are additional steps the company must take.

The company must:

• deduct 20% tax on the interest before paying it to the shareholder
• report and pay the 20% withheld tax every quarter via form CT61.

Seriously consider the wholly and exclusively rule for expenses incurred through the company

To qualify as a trading deduction for corporation tax, the trade purpose of an expense must be the sole purpose.

Where expenses are not incurred for the purposes of a trade, they will not be allowable as a corporation tax deduction.

Claim all allowable business expenses

Companies can claim a range of allowable expenses, which can reduce their taxable profits and their corporation tax liability.

Some allowable expenses that may be claimed are as follows:

• Software subscriptions: content creation and editing tools, social media management apps.
• Marketing: promotional content, paid ads, etc.
• Travel and accommodation: business travel expenses and hotels needed for meetings, events, projects, collaborations, etc.
• Professional services: accountants, legal advice, management fees.

Claim capital allowances and make use of the annual investment allowance

Capital allowances are a form of tax relief that allows UK companies to deduct an amount of the cost of qualifying business assets from their taxable profits.

The annual investment allowance (AIA) should be used as a priority, as this allows you to claim 100% of the cost of qualifying assets in the year of purchase up to a maximum of £1 million per year.

This means 100% of the cost of qualifying business assets can be deducted from the taxable profits in the year.

Examples of items you could claim capital allowances on are cameras, computers, lighting and studio equipment.

Be aware of the tax rules around PR packages and gifts

For a talent management company, gifts to influencers are not tax-deductible unless they meet certain criteria.

As mentioned, tax relief will only be given for expenses which have been incurred wholly and exclusively for the purpose of the trade.

For gifts to be tax-deductible, they must be less than £50 in value, branded with the company’s logo and must not consist of food and drink.

How can we help?

Trading through a limited company can offer significant tax and operational advantages for influencers and content creators but it’s not a one-size-fits-all solution. In the right circumstances, incorporating can be highly beneficial, but it’s important to get the structure right from the outset. Crowe’s Corporate Tax team can help you assess your individual situation and advise on the most effective setup for your business.