Paying tax on UGC usage rights can become more complicated when a creator receives one fee for producing content and another for allowing a brand to use it in its own advertising.
UGC and influencer contracts increasingly include these arrangements. A creator might receive an initial fee for producing photographs or videos. The brand may then pay separately for advertising rights, extended usage, exclusivity or a renewal of those rights.
For UK tax purposes, the starting point is understanding what the creator has actually agreed to provide. A single payment into the bank account does not necessarily tell the whole story.
The contract may involve both services performed by the creator and rights granted over the resulting content. This can affect the VAT treatment, particularly where overseas brands or management agencies are involved.
This guide explains how UK creators should approach UGC usage rights and licensing payments as their creator business grows.
What are UGC usage rights?
When a creator produces content for a brand, the initial fee may cover only the creation and delivery of that content. The creator may grant separate usage rights if the brand also wants to use the content in its own marketing.
Those rights could allow the brand to publish the content on its social media channels or website. They might also allow the brand to use it in paid advertising. The agreement will usually specify how the content can be used and for how long.
For example, a creator might include three months of organic social usage within the original fee but charge separately for 12 months of paid advertising rights.
One piece of content can therefore generate several payments for different elements of the commercial arrangement. Those differences can affect the creator’s tax and accounting position.
What is the brand actually paying you for?
Suppose Beth agrees to create four videos for a UK skincare company for £2,000. The company also wants 12 months’ paid social advertising rights and pays Beth a further £1,500. She receives another £750 for agreeing not to work with competing skincare brands during the campaign.
Beth receives £4,250, but the contract explains how the parties arrived at that figure:
£2,000 for creating the videos, £1,500 for 12 months of advertising rights and £750 for exclusivity.
All three amounts may form part of Beth's taxable creator business income, but we would still want to preserve that breakdown in her accounting records.
It tells us what Beth was actually paid for and becomes particularly useful if the advertising rights are later renewed. The breakdown can also help us establish the correct VAT treatment when a creator works with brands in different countries.
How are UGC usage rights taxed in the UK?
A separate payment for usage rights does not normally become tax-free because a contract describes it as a licence fee or royalty.
For a sole trader, payments for creating content and granting rights over it will generally contribute to the profits of the creator business. If a limited company enters into the brand contract, the income will normally contribute to the company’s profits instead.
Returning to Beth, her £2,000 creation fee, £1,500 advertising-rights payment and £750 exclusivity fee may all be taxable business income. We would nevertheless retain that breakdown rather than record £4,250 simply as “UGC income”.
This creates a clear link between the contract and the accounts. If the brand later extends its advertising rights, the records immediately show what the additional payment relates to.
UGC income and the VAT registration threshold
A creator's total business income is not necessarily the same as their taxable turnover for UK VAT purposes.
This matters when a creator works with both UK and overseas brands. Before including a payment in taxable turnover, we need to identify the supply, the customer and where that customer belongs.
Content creation and usage rights supplied to a UK business usually form part of your UK taxable turnover.
For an overseas business customer, the result can be different. Under the general B2B place-of-supply rule for services, the supply normally takes place where the customer belongs. If the customer belongs outside the UK, the supply may fall outside the scope of UK VAT.
A creator approaching the VAT registration threshold should therefore not simply add together every payment received from brands around the world.
The VAT treatment of UGC usage rights
A UGC agreement may give a brand considerably more than the finished photographs or videos.
The brand might acquire rights to reproduce the content on its website or publish it through its social channels. It could also acquire rights to use the content in paid advertising. HMRC's place-of-supply guidance specifically addresses copyright, licences and similar rights.
We would therefore examine what the contract grants to the brand. A fee for creating new content, a licence to use that content and an extension of existing advertising rights may all need to be considered when reviewing the VAT position.
Separate prices in the contract do not automatically mean that there are separate supplies for VAT. Equally, describing everything on an invoice as “content creation” does not settle the VAT treatment.
The contract and the underlying commercial arrangement should support the VAT treatment adopted.
When creator income falls outside the scope of UK VAT
Suppose Alex is a VAT-registered UK creator. He agrees to produce several videos for a UK sportswear company for £3,000. The agreement includes six months’ advertising usage rights.
As the customer belongs in the UK, Alex will generally charge UK VAT on the £3,000 fee
Now assume Alex enters into an equivalent agreement with a US sportswear company. If the US company receives the supply and the general B2B rule applies, the supply normally takes place where the customer belongs. Alex would therefore normally invoice the US company without UK VAT.
The £3,000 remains income of Alex’s creator business. However, the supply does not form part of his UK taxable turnover for the normal VAT registration test if its place of supply is outside the UK.
A creator can therefore have worldwide business income above the VAT registration threshold without necessarily having the same amount of UK taxable turnover.
Management agencies, commission and creator turnover
Where a management agency sits between the creator and the brand, the creator’s bank receipt may not represent their turnover.
Suppose a brand agrees a £10,000 campaign fee. The creator's agency retains 20% commission and transfers £8,000.
If the creator is entitled to the full £10,000, the accounts may need to show £10,000 of income and a separate £2,000 management fee. Recording only the £8,000 received could understate turnover.
The position is different if the agency contracts with the brand in its own name and then purchases the creator's services.
HMRC's VAT guidance distinguishes between businesses acting as agents for someone else and those acting in their own name. We would therefore examine the contractual relationship and identify who invoices the brand. We would also establish whether the management company acts as agent or principal.
That analysis can affect both the accounts and the creator’s taxable turnover for VAT.
Overseas brand deals: identifying the customer
The brand featured in a campaign is not necessarily the creator's customer.
An international business might engage a UK creator through its UK subsidiary, an overseas group company or a marketing agency. For VAT purposes, we need to identify which entity receives the supply. We then need to establish where that business belongs.
This matters when a creator treats a B2B supply as taking place outside the UK. HMRC expects the supplier to retain evidence that the overseas customer is in business and belongs outside the UK.
The contract, statement of work and invoice should support that VAT treatment. The country from which the payment originated does not determine the answer.
International campaigns can also contain several elements. A creator might produce content in the UK, license it to an overseas company and travel abroad for a promotional appearance. We should not automatically assume that each activity has the same tax consequences.
Exclusivity clauses can have their own tax implications
Usage rights are not the only contractual rights that can affect the tax analysis.
A brand might pay a creator an additional fee not to promote competing products for six months. That payment will normally form part of the creator business’s income.
There is also a specific VAT point. HMRC’s place-of-supply guidance covers agreements under which a business accepts an obligation not to pursue a business activity or exercise a right.
An exclusivity clause can therefore be relevant when reviewing what the creator has supplied and where that supply takes place.
Where a campaign combines content creation, advertising rights and exclusivity, we would consider how the elements work together before determining the VAT treatment. Separate prices alone do not establish separate supplies for VAT purposes.
When a gifted product is treated as payment
Describing a product as “gifted” does not necessarily make it a gift for tax purposes. We need to consider why the creator received it and what they agreed to provide in return.
Suppose a brand pays a creator £1,500 and provides a product worth £500. In return, the creator agrees to produce three videos and give the brand six months’ advertising rights.
The product forms part of the commercial arrangement and may need to be accounted for alongside the cash fee. HMRC's VAT guidance confirms that consideration can take monetary or non-monetary form, or a combination of both.
The position differs if a brand sends a product without requiring the creator to post about it, produce content or grant usage rights.
For VAT-registered creators, non-cash consideration can also affect the amount on which they account for VAT.
We consider this subject in more detail in our guide to tax on gifted products for content creators and influencers.
Keeping UGC contracts and accounting records aligned
As UGC arrangements become more sophisticated, the contract becomes an important part of the creator's tax records.
For each campaign, we recommend keeping the contract or statement of work with the invoice and evidence of payment. The records should also identify any content-creation fee, usage rights, licensing period, exclusivity payment and subsequent renewal.
Creators using management agencies should retain statements showing the gross campaign fee, commission and net payment. For overseas customers, the records should identify the contracting entity and provide evidence of where that customer belongs for VAT purposes.
The objective is not to create unnecessary administration. The records should simply allow the accounts to reflect what actually happened.
Good records become invaluable if a brand renews a campaign, HMRC queries a transaction or the creator subsequently registers for VAT.
Paying tax on UGC usage rights
UGC contracts increasingly involve more than a fee for creating content. Usage rights, exclusivity, agency commission and overseas brands can affect how a campaign appears in the accounts. They can also affect its VAT treatment.
The contract should therefore support the figures in the creator’s accounts rather than every campaign appearing simply as “UGC income”.
For wider guidance on sponsorships, platform earnings, gifted products and other creator income, read our Tax for Content Creators: The Complete UK Guide.
Need advice on your creator business?
If your contracts now include usage rights, overseas brands, management agencies or VAT, we can review the arrangements and their accounting and tax treatment.
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