Tax Guidance for Social Media Influencers: What You Need to Know
With an increase in those earning income from social media and promotional activities, the Revenue Commissioners have issued a manual to reiterate that such income is liable to tax based on the application of ordinary tax rules.
Types of Taxable Income
Income derived from social media or promotional activities is chargeable to tax, even in circumstances where the activity is conducted on a casual basis only and is not the individual’s or company’s main business or main source of income.
Such income can be in the form of subscriptions, advertising, sponsorship, brand ambassadorship or endorsement fees and may be monetary or non-monetary in nature. Where the receipt is in non-monetary form, i.e. goods/services, then the value of such must be determined and is regarded as income.
Determining If Social Media Activities Constitute a Trade
Whether the profits or gains derived from social media or promotional activities arise in the course of a trade is a question of fact, having regard to the particular facts and circumstances of each case and also having regard to the ‘badges of trade’ and caselaw.
Example: Full Time Influencer
Orla is an adventure travel enthusiast. She is a full-time travel blogger and regularly posts content on various social media channels. She receives income from sponsored blog posts and affiliate marketing. Orla’s social media activity is carried out on an ongoing, frequent basis with the intention of making a profit. Her activity has the characteristics of a trade. She is obliged to return the income as Case I income.
Deductible and Non-Deductible Expenses
In computing the profits assessable to tax, certain expenses may be deducted provided they are:
- Revenue and not capital in nature,
- Incurred wholly and exclusively for the purposes of the trade, and
- Not specifically disallowed in law.
When considering if an expense was incurred wholly and exclusively for the purposes of the trade, one should be aware that if the expense has both a business and non-business purpose then the entire expense is disallowed, e.g. clothes. Similarly, hair and make-up expenses are also disallowed.
If carrying on a trade, a deduction for capital expenses, in the form of capital allowances, may be available. However, if the income is derived from ad-hoc activities, then no deductibility is permitted for capital expenses.
Example: Casual Influencer
John is a full-time software developer who enjoys mountain hiking in his spare time. He pays an annual subscription to an online map and trails app. He posts reviews of trails and landscape photographs online on social media channels one or two times a year. People with occasionally contact John to purchase a photograph he’s posted on social media. He is obliged to declare the profit from the online activities. When calculating the taxable profit from the activity, he is allowed to deduct the costs of print, post and stationery incurred from sales of his photographs. The costs of the annual subscription to the hiking app or the cost of hiking clothing is not deductible, as the costs are a personal cost and not incurred directly in the provision of the social media content. As John is not carrying on a trading activity capital allowances, e.g. on photographic equipment, are not available.
Business Structures and VAT Considerations
Such activities may be carried on by a person through a sole trade, partnership or a company.
In addition to Income Tax and Corporation Tax, persons carrying on a business need to be aware of their obligations to register and account for VAT should the value of their supplies exceed the relevant registration thresholds.
For further information on tax guidance for social media influencers, please contact us.
