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‘Thousands’ of influencers and content creators falling foul of HMRC rules on online earnings.

The Financial Times has reported that HM Revenue & Customs is currently writing to several thousand online traders, gamers, NFT artists and social media influencers who it suspects may have not paid the correct amount of tax. This isn’t the first time that HMRC has looked to target people working in this sector and with some in this space reportedly earning high six and seven figure salaries, it is not a surprise that they should look to target them. HMRC is reportedly writing to around 2,300 content creators whose earnings come from posting about products and/or who may also receive ‘free’ gifts in return for these posts.

It is also reported to be sending around 2,000 people who sell goods and services online via Ebay, Facebook and Etsy ‘nudge letters’ to remind them to pay the correct amount of tax. It is expected that many younger people might be in receipt of these letters having turned a hobby or ‘side hustle’ into a lucrative source of income. Part of the issue is that if people being contacted have not previously taken tax advice, then they might be mistakenly operating and thinking that they don’t have to report their income unless it exceeds the income tax free allowance which is currently £12,570. However, they need to report any online income which is above £1,000.

In addition to income tax, VAT may also be overlooked. The current threshold for charging VAT on goods or services is £85,000 and this needs to be charged once this threshold is reached during a tax year. Parents of young people under the age of 18 should be aware of the level of income that their offspring might be generating to ensure they also stay on the right side of the rules. The position is also the same for UK resident influencers and content creators who may create their content outside of the UK.

If you have received a nudge letter from HMRC then you should not ignore it, as HMRC will have received information from the various online platforms and may have already carried out some level of investigation. If you cooperate fully and pay any tax owed, then it is likely that any penalties incurred will also be lower. A penalty is not normally charged for genuine mistakes and where full cooperation is given. If you cannot pay the bill in full then it may be possible to arrange a payment plan with HMRC, but they will charge interest on the outstanding debt. The message for anyone generating any online income over £1,000 or who is likely to exceed that level is to take tax advice and to adopt a business mindset, as there may be more tax efficient ways to structure the operation as it grows, as there is with all businesses.

Please get in touch with Antony Smith on the details below if you would like to discuss anything related to the content of this article.

 

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Anthony Smith - Director at Hillier Hopkins

Antony has extensive knowledge of UK and international tax, offshore structures and trust and estate planning. His particular focus is on long term wealth planning for families and finding tax efficient solutions to complex situations.

Contact Antony at antony.smith@hhllp.co.uk or on +44 (0)20 7004 7148

London