Influencer marketing

What it means

Influencer marketing is a company working with people who have an audience on social media that trusts them. The influencer presents, uses or recommends the product in their content, and the company pays in money, goods, commission on sales or a mix.

Its strength lies in trust. A recommendation from someone followers see as authentic works differently from an advertisement. Smaller influencers with a narrow, engaged audience often deliver more than big names with millions of followers.

Such a collaboration is advertising, and the rules on advertising and consumer protection apply. The post must be clearly labelled as an ad or a paid partnership. Hidden advertising is a misleading commercial practice and can also be unfair competition.

How it works in practice

For the company, the costs of a collaboration are deductible if backed by a contract and an invoice or other document. We recommend a written contract covering the deliverables, dates, ad labelling, content rights and how payment is made.

For the influencer, the payment is taxable income even if they receive only goods. If they run a business it is business income, otherwise other income. When working with a foreign influencer, the company may have to deal with VAT self-assessment and withholding tax.

Commission on discount codes or links is a form of affiliate marketing. The company should be able to show how the commission was calculated and track sales by code to see which collaborations pay off.

What to watch out for

A common mistake is agreeing a collaboration only through social media messages, with no contract and no invoice. At an audit the company cannot prove what it paid for, and the cost may be disallowed. A dispute over what the influencer was meant to deliver is equally hard to resolve.

The second risk is reputation. The influencer becomes part of the company’s brand, and their controversial statements can turn against it. The contract should allow the collaboration to be ended and the content removed.