As the content creator economy continues to boom, more influencers and content creators are receiving free products, services or even holidays for exposure on social media.

However, Lee Murphy, Managing Director of The Accountancy Partnership, specialist accountants for freelancers, influencers and the self-employed, states that anyone who receives a free product or service, with the obligation to post about it, should be paying HMRC. Getting it wrong could cost content creators far more than the product was worth.

Murphy states:

“If you receive something for free and the brand doesn’t expect anything in return, it’s not taxable. It’s a bit like getting a present from your Grandmother; she gives it to you because she likes you, not because she wants a shoutout on Instagram.

However, if there’s an agreement that the creator will post the product or service on their social media to advertise it, then the value of the item or service is classed as income and must be declared to HMRC. It’s considered a form of payment, just not in monetary terms.”

How to work out tax on gifted items:

1. Determine whether something is truly a gift

“If the brand gives you something with absolutely no expectation of promotion of it, then it’s a genuine gift and not taxable. However, if you must first agree to posting about it, tagging the brand or featuring the product or service in any of your content, then it’ll be classed as business income.”

2. Find the market value

“HMRC expects influencers and content creators to declare the normal retail price of the item or service. If it’s on sale, you still need to declare the normal face-value price.

For example, if you are given a £100 meal for free in exchange for talking about your experience at a restaurant, then you need to declare £100 as income in your accounts.”

3. Record and declare it properly

“Keep records of all your gifted items and experiences, similarly to how you would with any cash payments or payslips from a job. You can then add the value of taxable gifts to your income when completing your Self Assessment tax return.”

4. Deduct allowable expenses

“If you incur costs to create the content, such as editing software, or transport to get to a restaurant or airport, then these may be deducted as a business expense to reduce your tax bill.”

Murphy adds that the rise in brand partnerships has blurred the line between genuine gifting and commercial deals, but HMRC is taking notice of this.

“Influencers are businesses; some people do this as their full-time role. Even if the accounts start as hobbies, if you receive any type of gifted product in exchange for posting about it, then you need to treat it as income. It’s better to be honest with HMRC as the fines could outweigh what the gifted products would’ve been worth.”