- HMRC is investigating businesses that provide gifts to social media influencers in exchange for promoting their brands and products.
- The tax authority has sent ‘nudge letters’ to online traders, gamers, and influencers suspected of not paying enough income tax, and is now issuing VAT assessments to businesses that fail to account for VAT correctly on the value of these gifts.
- HMRC believes that gifts provided to influencers by businesses are not simple business gifts, but rather a form of non-monetary consideration for the provision of advertising or promotional services. This means that instead of applying the business gift rules, HMRC values the transaction using the normal retail selling price of the goods and/or services supplied to the influencer, potentially increasing the VAT liability for businesses.
- Many UK retailers have already been contacted by HMRC regarding their arrangements with influencers, and more can expect to receive questionnaires requesting further information.
Source RSM
See also HMRC Guidance: Business promotions (VAT Notice 700/7)
