HMRC target tax due on income from online influencers

Nick McChesney, Director, VAT and Customs Duty Services and Natalie Snow, Assistant Manager, VAT and Customs Duty Services
Use of digital platforms and social media has grown rapidly and offers individual users new and often lucrative opportunities to monetise their assets or content.

With support from technology, what might simply start as a hobby may produce increasingly significant amounts of income.  There has been a considerable increase in the instances of individuals, even children, generating receipts from online activity. This can include posting and exploiting content online, or trading in goods and services. Opportunities in the sharing economy range from the sale of vintage fashion to those offering stays in residential property.

Online influencers in particular are thriving. Influencers have various ways to generate income; acting as a brand ambassadors, displaying advertising or marketing/selling their own content, such as images or music.

As well as receiving money, influencers may also be ‘gifted’ a product or service in return for promoting brands. This too might be seen as taxable income.

HMRC action

HMRC is now running targeted campaigns aimed at individuals who they have identified with potential earnings from online activity. They are sending nudge letters to those with activities on line who may have failed to report or declare this in a tax return.

If you have received a nudge letter it is important you do not ignore this. Early co-operation and taking steps to resolve historic tax issues will help mitigate penalties that HMRC seek for any failures/inaccuracies. 

Tax obligations

In a lot of cases, individuals are unaware that they might have a taxable trade or profession which has to be reported to HMRC. Money earned through online platforms is, in principle, subject to income tax and National Insurance Contributions and so it is important to consider whether what you, or children under your guardianship, are doing has to be declared in any way.

If you live in the UK and make a profit from making content online or selling goods, the profit is taxable and must be reported to HMRC through a tax return. While there are certain allowances that might be available to reduce the amount of tax payable, you have an obligation to check the position and report this to HMRC.

As well as income tax issues, there can also be VAT issues for those selling products or services online. Online service providers or those trading physical goods online have a liability to register for VAT if their turnover from supplies in the UK exceeds the £85,000 registration threshold. A potential VAT liability also exists when making supplies of digital services to overseas consumers. Those selling online need to consider the role of any platform or marketplace and how the VAT due is to be correctly accounted for by the parties involved.

Business people in a glass office

How we can help

We can help you to understand your tax obligations, assist in bringing your affairs up to date and mitigate your exposure to penalties. If you are unsure about your tax obligations, or have received a nudge letter please contact John Cassidy.

For any further information on VAT related issues please contact Robert Marchant. If you require any further information on how to manage your personal tax please contact Peter Fairchild.

Contact us

Robert Marchant
Robert Marchant
Partner, National Head of Tax
Peter Fairchild
Pete Fairchild
Partner, Private Clients
John Cassidy
John Cassidy
Partner, Head of Tax Resolutions