Influencers subject to tax on non-cash gifts

There is currently no legislation specifically targeted at social media influencers, however the fast-growing industry is very much on HMRC's radar.

Earlier this year HMRC sent nudge letters to thousands of influencers as well as gamers and online traders on sites such as Etsy and Facebook Marketplace to remind them that they should be paying tax on their earnings.

Where receipts are in the form of cash in return for goods; advertising revenue from YouTube hits; or paid-for-posts they are clearly taxable earnings and, if above £1,000 in total in a tax year, should be declared to HMRC via self assessment. But what if instead of cash you are paid for your services as an influencer with freebies such as the latest trainers or a luxury holiday?

These so-called gifts are sent by brands hoping for content in return. This can range from a brief favourable mention of the product to gushing Instagram posts and even promotional videos. The latter is less ambiguous – there is usually a contract in place specifying the required output and the 'gifts' would be seen as payment-in-kind for advertising and should be declared as income.

A greyer area surrounds the sending of gifts to social media stars with no obligation to share promotional content. The question then is whether the recipient is carrying on a trade. For influencers that carry on promotional activity as a sole trader the receipt of a free item, even though badged as a gift, is likely to be seen by HMRC as a barter transaction, or consideration.

Put simply, if you are creating content with a view to making a profit then this is trading and the earnings – whether cash or non-cash items – are taxable. The amount of income to be recognised should be based on the cash value of the item.