Morag Ofili discusses why influencers need to consider the residency position whilst working abroad during the pandemic
Like it or loathe it, influencer marketing is a big business. Influencers have the ability to connect brands with people around the globe and make thousands (sometimes millions) of pounds through just one post. Influencers include actors, sports personalities and reality TV stars, as well as those who have made a name for themselves online.
Some social media influencers have chosen to embark on business trips during the pandemic – leading to increased scrutiny of this industry.
As the pandemic rages on and several notable players in this field have decided to remain overseas indefinitely to avoid lockdown restrictions and continue to work, few will have given thought to their residency position and its impact on taxation.
This is a complex area of taxation. Different countries have different rules and agreements to decide where you are tax resident based on factors like where you spend your time, where you work, or where you have assets or family members.
As we approach the first anniversary of lockdown, many of those who left the UK this time last year could have unwittingly become tax resident in another jurisdiction.
Not only does this raise potential tax compliance issues abroad, but may complicate one’s UK tax position in both the tax year of departure and upon return to the UK.
In addition to any personal tax concerns for the influencer, if they operate through a Personal Services Company (PSC), that company could face a corporate tax liability in the local jurisdiction if it is determined that their presence abroad creates a permanent establishment.
Furthermore, unless one decides to stay non-resident for five tax years, certain income received while abroad may be taxed locally and again upon returning to the UK.
Conversely, some people are stuck in the UK and, unable to return home, have continued to work throughout the pandemic. The tax implications of this also need to be carefully considered.
Several countries put in place emergency measures to relax the rules governing residency to avoid people becoming unintentionally tax resident due to the Covid-19 restrictions, but there are limits to how these rules will be applied. Certainly, where one has chosen to live and work abroad (as opposed to being forced to by the lockdown restrictions) it seems unlikely that these rules will be engaged.
HMRC have stated on a number of occasions that they use social media to ensure people are paying the correct amount of tax and when your job demands that you share information with the world, it is important to know that this includes tax authorities.
The problems in this area are compounded by the fact that some influencers are concealing their whereabouts on posts to avoid public backlash, or worse – lose business. Tax errors that are deliberate and concealed attract the highest penalties, meaning that attempts to be discreet could be interpreted another way by HMRC.
It would be advisable to ask clients about their social media income and where they have chosen to make a home for themselves during lockdown to ensure they are not trending for the wrong reasons.