How Instagram Influencers are committing tax fraud
In an ever-changing world, there are tens of thousands of so-called ‘Influencers’ who have built up a following on social media platforms by posting photos and giving their own view on the world.
When these people are getting engagement on their social media posts into the millions you can soon see why so many high-profile brands want to work with them. In the top cases the brands will pay for ad placements but the newest way of advertising presents a tax nightmare.
If a company paid you £100 to post a picture of you with their new product, it is quite clear that the advert you are providing them with is worth £100. You make £100 and therefore you will pay tax on that £100.
However, what if you received an item of clothing worth £100 in exchange for the post. Well, the post is still worth £100 to the company (give or take some profit margins) yet the influencer is not receiving any physical cash so should they pay tax on a “gift.”
Well, according to tax rules a “gift” can only be tax free if the giver receives no benefit from the transaction. So let’s assume that influencers should be accounting for every “#gifted” item that they receive in the year.
In the UK you can earn up to £1,000 as a ‘small business’ which many people use for their side hustle incomes. So do we think that influencers are likely to be exceeding this threshold, and will therefore be liable to tax on all these freebies?
Let’s put it into perspective:
An item of clothing worth more than £19.23 every week
Make up products worth more than £83.33 every month
A hotel-stay worth more than £166.67 every 2 months
Yes, some of these influencers really do blag themselves free hotel stays, here are some more items that they aren’t paying tax on:
Free food and drinks
Free holidays
Free beauty treatments
Free haircuts
The list goes on and on. You can easily see how an influencer with 20k + followers, who specialises in fashion for example, and gets a reasonable amount of gifted products would be liable to pay tax on all items which they have received.
Therefore, does this make Instagram Influencers tax evaders? Let us know what you think @thebankengine.
Resources:
https://www.gov.uk/inheritance-tax/gifts
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income