Crypto tax issues for social influencers
Many social influencers now receive payments in cryptocurrencies like Bitcoin and Ethereum. Therefore, understanding the crypto tax issues for social influencers is crucial if you operate in this space.
Payments in crypto
HMRC does not regard crypto as a currency. However, where payment in crypto is received in return for goods or services, influencers should convert the crypto's value to £sterling at the time of the transaction, using a reliable exchange rate.
Keeping compliant with HMRC
One of the main crypto tax issues for social influencers is staying compliant with HMRC by correctly reporting their transactions. In order to do this they need to:
Practical tips
Managing crypto payments might seem tricky, however social influencers can follow these strategies:
Record-keeping and valuations
You must always record the date and time of the transaction. Furthermore you should note the amount of crypto received and use a reliable exchange rate for convert the crypto to £sterling. Lastly always keep records of the exchange rate used,
Handling volatility in crypto values
Because crypto can change value quickly you should always use the exchange rate at the time of the transaction. This will ensure that any VAT is accounted for correctly and the right amount of taxable income is reported to HMRC.
Regularly review transactions
You should regularly review your crypto transactions to ensure they are accurately recorded and reported. Furthermore it is important to correct any mistakes promptly in order to avoid any issues with HMRC.
Use accounting software
If you use accounting software that supports cryptocurrency transactions this will simplify tracking and converting payments What's more, there are many software options can automate exchange rate conversions.
NFT's and tax considerations
Overview
In addition to crypto, many social influencers also deal with NFTs (Non-Fungible Tokens). These digital assets can represent anything from art to videos and have become a popular way for influencers to monetise content. Therefore, addressing NFT and crypto tax issues for influencers is crucial for maintaining compliance.
VAT and NFT transactions
Whilst we've previously covered this topic some time ago, it is worth revisiting in the context of social influencers.
Firstly, it is important to establish whether any transactions involving purchases or sales are an investment activity or being carried out as part of the individual's trade. If it is the former, there are unlikely to be any VAT issues.
However, if the latter, you'll need to determine the place of supply for UK VAT purposes and whether the transaction is B2B or B2C. As a result, this will determine how VAT is correctly accounted for.
Income and corporation tax implications
Social influencers operating their business as sole traders, partnerships or limited companies will have income or corporation tax issues to consider.
Additionally, social influencers need to establish whether transactions involving purchases or sales of NFT's are an investment or trading activity. If it is the former, then any profits or losses will be consider capital gains (or losses) subject to capital gains or corporation tax.
Where it is a trading activity then it is vital that any purchase and associated costs are accurately reported particularly where is a high volume of trading activity.
Specific scenarios for influencers
Selling Digital Art or Videos as NFT's
Those social influencers creating digital art or videos and selling them as NFT's as part of their trade may need to charge VAT on these sales and account for this to HMRC. They will also need to correctly report the income received.
Collaborations involving NFT's
Frequently social influencers collaborate with brands or other creators using NFT's. Again they will need to consider the VAT implications where the location of their collaborator is concerned. This is because transactions may either be outside the scope of UK VAT or subject to UK VAT.
Summary
By staying organized and informed, social influencers can effectively manage their VAT and direct tax obligations for both crypto and NFT transactions. Understanding the crypto and NFT issues will help your maintain compliance and focus on growing your brand. Being aware of these tax issues for influencers is key to avoiding issues with HMRC at a later date.
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