HMRC is chasing 4,300 social media influencers and online earners over taxes
HMRC is chasing 4,300 social media influencers and online earners over taxes
#HMRC #chasing #social #media #influencers #online #earners #taxes Welcome to InNewCL, here is the new story we have for you today:
Click Me To View Restricted Videos
HM Revenue & Customs writes to thousands of online retailers, gamers and social media “influencers” who are suspected of not paying the correct taxes on money made online.
As part of Britain’s Internal Revenue Service’s recent attempts to keep up with the rapid expansion of the digital economy, HMRC is writing to 2,300 online content creators making money or receiving gifts for posting material on platforms including Instagram, TikTok and YouTube.
This includes people who have a large following and receive gifts from companies in exchange for promoting their products, as well as people who are paid by platforms based on the engagement of their content.
HMRC plans to send a further 2,000 ‘nudge’ letters to people selling goods and services through online marketplaces such as eBay, Facebook and Etsy. The tax authority said letters would be sent to people “whom we believe owe us taxes”.
Online content creation and marketplace commerce have exploded in recent years. A study by software company Adobe last year found that the number of “content creators” in the UK doubled to about 16 million between 2020 and 2022, most of them as part-time jobs, 65 percent full-time.
However, experts say awareness of the tax due is low among many people who monetize their online content, particularly in their teens and 20s. Adobe’s report revealed that around 2.8 million UK “influencers” were making around £120 an hour on average.
“It’s not because they avoid taxes on purpose — it’s because they literally don’t know they should pay them,” says Jessica Narweh, a 25-year-old business coach and influencer who previously trained as a tax accountant. “The main focus is on how to get followers – I don’t think taxes will cross their mind until they see another influencer talking about it.”
Jessica Narweh: “I don’t think taxes cross their mind until they see another influencer talking about it.”
Narweh said many young people, particularly those without other employment, feel they don’t need to report earned online income until it exceeds the income tax-free allowance, which is currently £12,570 a year. In fact, online earnings above the £1,000 tax-free trade allowance must be reported.
She added that people often don’t realize that the tax position for UK-based content creators is the same no matter where in the world their revenue comes from.
Emma Rawson, technical officer at the Association of Taxation Technicians, added that there is a lack of awareness of the need to pay taxes on free products given to influencers for promotional purposes. “Usually you would have to work out what it’s worth and how much tax you owe,” she said.
HMRC did not disclose how much tax online platform earners are missing out on. But Adam Craggs, tax partner at law firm RPC, said HMRC needed to believe that “a significant part of the income of individuals making large sums of money is not taxed”.
Craggs said a 21-year-old computer games programmer contacted RPC a few weeks ago after receiving a push letter from HMRC. He’d made a six-figure sum selling video games online last year and hadn’t considered the potential tax implications.
“These are very creative, young talented people who are very good at programming and have commercialized it – before you know it they’re getting quite a substantial income,” Craggs said, adding that one young person who approached RPC, Taxes on games he developed owed money over five tax years since he was 16.
Funds earned through online platforms are subject to income tax and must be declared on a self-assessment tax return, unless you choose to incorporate a business when you would be subject to corporate income tax.
Individuals who make a profit from their online activity are considered by HMRC to be traders and must register with Revenue and complete a self-assessment tax return if their gross income is over £1,000.
Even if you don’t engage in social media activities with the specific purpose of making a profit, if your gross income from those activities (plus all other trading and other income, not just online income) is more than £1,000 per year, says HMRC you still have to report it.
Recipients of an HMRC nudge letter shouldn’t ignore them, tax advisers say. The financial administration collects information from online platforms and also carries out investigative work. If you fully cooperate in paying the taxes you owe, the penalties are less than if you resist. There is usually no penalty if the error was not intentional and you cooperate.
If you cannot afford the tax bill you can arrange a late payment plan with HMRC but interest will be charged.
HMRC said their nudge letters were “routine activities”. It added: “We believe our customers want to pay the right amount of tax, so we’re taking steps to help people do that.”
