You've started paying creators a cut of every sale they drive through TikTok, and now your bookkeeping has questions. Is that commission tax deductible? Do you reclaim VAT on it? What happens when the creator is in Germany, or has no VAT number, or just sends you a screenshot instead of an invoice?
This guide answers all of that for a UK business that pays affiliate or influencer commission to TikTok creators. It covers how to deduct the cost against your profits, how the VAT reverse charge works when a creator is overseas, what a valid VAT invoice has to show, and where self-billing fits in.
It's written for ecommerce brands, dropshippers and product sellers running affiliate or creator programmes. Figures are for the 2025/26 tax year. This is general guidance, not advice on your specific facts.
Is affiliate commission paid to TikTok creators tax deductible?
Yes. Affiliate commission you pay creators to promote your products is an advertising and marketing cost, so it's an allowable business expense as long as it's incurred wholly and exclusively for your trade.
That's the same test HMRC applies to any business cost. If the payment is genuinely to generate sales, it reduces your taxable profit, whether you trade as a sole trader, a partnership or a limited company. gov.uk lists "advertising or marketing" explicitly among allowable expenses for the self-employed, and the same wholly-and-exclusively principle runs through the corporation tax rules.
A few practical points keep the deduction clean:
- Keep the evidence. Hold the commission statement or invoice, the affiliate agreement and the payment record. If HMRC ever asks, you want to show what the payment was for and that a real service was delivered.
- Match it to the period. Commission relates to the sales it was earned on. Accrue commission that's been earned but not yet paid at your year-end so the cost lands in the right accounting period.
- Watch the entertainment line. Paying for promotion is advertising and deductible. Wining and dining a creator, or gifting them a lavish trip dressed up as "collaboration", strays into business entertainment, which is not deductible. Free product sent purely so a creator can review and promote it is generally a marketing cost, not entertainment.
Does it matter if I pay in cash, free product or a discount code cut?
The form of the reward doesn't change the principle, but it changes the bookkeeping. A cash commission is a straightforward expense. Free product given as the reward has a cost (what the stock cost you) that already sits in your accounts, and for VAT there can be a deemed supply on goods given away. Most TikTok affiliate setups pay cash commission on tracked sales, which is the simplest case and the one this guide focuses on.
How does VAT work on commission paid to a UK VAT-registered creator?
If the creator is in the UK and VAT registered, they charge you VAT at the standard rate of 20% on their commission. You pay the gross amount and, if you're VAT registered, reclaim that VAT as input tax on your return, subject to the normal recovery rules.
You need a valid VAT invoice from them to reclaim it. No valid invoice, no input tax. We cover exactly what that invoice must show further down.
If the UK creator is not VAT registered, which is common for smaller creators below the £90,000 registration threshold, there's no VAT to charge and none to reclaim. You simply record the commission as a cost. That's still fully deductible against your profits.
How does the VAT reverse charge work for overseas TikTok creators?
This is where most brands trip up. When a UK VAT-registered business buys a service from a supplier based outside the UK, you usually have to account for the VAT yourself under the reverse charge. The creator invoices you with no UK VAT, and you put the VAT on both sides of your own return.
Marketing and promotional services fall under the B2B general rule, where the place of supply is where the customer belongs. Since you (the customer) belong in the UK, the supply is treated as taking place in the UK, and the reverse charge shifts the VAT accounting onto you. HMRC's place-of-supply guidance (VAT Notice 741A) sets this out.
In practice you treat it as if you had supplied the service to yourself:
- Work out the VAT as if a UK supplier had charged it, at 20% on the commission.
- Put that VAT in Box 1 (VAT due) and the same figure in Box 4 (VAT reclaimable), so for a fully taxable business it nets to nil.
- Put the net value of the commission in Box 6 and Box 7.
So a UK ecommerce brand paying a creator in Spain doesn't hand any cash to HMRC on that commission (assuming full VAT recovery), but it must still show the entries. Leaving them off is a common error that surfaces in VAT inspections.
Illustrative example: reverse charge on overseas creator commission
Northern Lane Supplements (illustrative example) is a UK VAT-registered ecommerce brand. In a quarter it pays £4,000 of affiliate commission to a TikTok creator based in Ireland, who invoices with no VAT.
Northern Lane applies the reverse charge at 20%:
| VAT return box | What goes in it | Amount |
|---|---|---|
| Box 1 (VAT due) | Output VAT, 20% of £4,000 | £800 |
| Box 4 (VAT reclaimable) | Input VAT, same supply | £800 |
| Box 6 (total sales, net) | Net value of the service | £4,000 |
| Box 7 (total purchases, net) | Net value of the service | £4,000 |
The £800 in Box 1 and the £800 in Box 4 cancel out, so there's no net VAT cost. But both entries are required, and the £4,000 net value still has to be reported in Boxes 6 and 7.
Does the reverse charge affect whether I need to register for VAT?
Yes, and this is the trap for brands that aren't yet VAT registered. The value of reverse-charge services you buy from abroad counts towards the £90,000 VAT registration threshold. If your own UK sales plus the overseas commission you receive push you over £90,000 in a rolling 12-month period, you may have to register even if your domestic sales alone would stay under.
If you're not VAT registered at all, there's no reverse charge to account for on the commission itself, but keep an eye on that threshold test as your creator spend grows.
What if I'm on the Flat Rate Scheme?
The reverse charge sits outside the Flat Rate Scheme. If you're on the FRS and buy reverse-charge services from an overseas creator, you exclude that commission from your flat-rate turnover and instead account for the VAT the normal way, in Boxes 1 and 4, exactly as a standard-accounting business would. HMRC's Flat Rate Scheme guidance (VAT Notice 733) confirms reverse-charge purchases are dealt with outside the scheme.
What does a valid VAT invoice for affiliate commission need to show?
To reclaim input VAT on a UK creator's commission, you need a full VAT invoice. HMRC's record-keeping rules (VAT Notice 700/21) say a full VAT invoice must include:
- a unique sequential invoice number
- the supplier's name, address and VAT registration number
- your name and address (the customer)
- the time of supply (tax point) and the date of issue
- a description sufficient to identify the service (for example "affiliate commission, March sales")
- the quantity or extent of the service, the VAT rate and the amount payable, excluding VAT
- the rate of any cash discount
- the total VAT chargeable in sterling
- the total amount payable excluding VAT
A TikTok DM, a screenshot of a dashboard, or a PayPal note is not a VAT invoice. If a UK VAT-registered creator can't produce a compliant invoice, you can't reclaim the VAT, so build invoicing into your affiliate agreement from the start.
For an overseas creator under the reverse charge, you're not reclaiming VAT off their invoice, so their document doesn't need to meet UK VAT-invoice rules. You still want a clear commercial invoice or statement showing what the commission was for, to support the deduction and your reverse-charge entries.
Can I use self-billing for creator commission?
Often, yes, and it's a tidy fit for affiliate programmes where you, the brand, calculate the commission from your own sales data. Under self-billing, the customer raises the supplier's invoice and sends it to them with the payment, instead of waiting for the supplier to invoice.
HMRC's self-billing guidance (VAT Notice 700/62) sets conditions you must meet:
- Both parties must be VAT registered. You can only self-bill a creator who is UK VAT registered, and you can't reclaim VAT on a self-billed invoice if the supplier isn't registered.
- You need a written self-billing agreement that both sides accept. It typically runs for 12 months, then needs reviewing.
- The creator must agree not to issue their own VAT invoices for the commission covered by the agreement.
- The creator must tell you if they deregister for VAT, get a new VAT number, or transfer their business.
Self-billing only changes who produces the invoice. It doesn't change the underlying VAT position, so an overseas creator's commission still goes through the reverse charge rather than being self-billed with UK VAT.
Do the digital platform reporting rules apply to me?
Probably not in the way people fear. The Reporting Rules for Digital Platforms (the UK's version of the OECD model rules) require platform operators, the apps and websites that connect sellers to customers, to report seller income to HMRC. The first reports covering the 2024 calendar year were due by 31 January 2025.
If you're a brand simply paying commission to creators, you're not operating a platform that connects third-party sellers to buyers, so these rules generally don't put a reporting duty on you. The obligation sits with platforms like TikTok Shop in respect of sellers on the platform, not with an advertiser paying for promotion.
It's worth knowing the flip side for your creators: if a platform reports a creator's income, that doesn't automatically create a new tax. As gov.uk puts it, a platform reporting your details to HMRC "does not automatically mean you owe tax." The creator's own tax position depends on whether they're trading. That's their responsibility, not yours, but it's useful context when creators ask.
For more on getting the numbers and the platform side right, see our guidance for TikTok creators and the brands who work with them.
Key takeaways
- Affiliate commission paid to TikTok creators is a deductible advertising cost if it's wholly and exclusively for your trade. Keep agreements, statements and payment records.
- A UK VAT-registered creator charges 20% VAT, which you reclaim with a valid VAT invoice. A non-registered UK creator charges no VAT.
- An overseas creator's commission goes through the reverse charge: 20% in Box 1 and Box 4, net value in Box 6 and Box 7.
- Reverse-charge services count towards the £90,000 VAT registration threshold.
- On the Flat Rate Scheme, account for reverse-charge commission outside the scheme.
- A valid VAT invoice has specific required contents, and self-billing only works if both parties are UK VAT registered with an agreement in place.
FAQs
Is affiliate commission paid to TikTok creators tax deductible?
Yes. It's an advertising and marketing cost and is allowable against your profits as long as it's incurred wholly and exclusively for your trade. Keep the affiliate agreement, commission statements and payment records as evidence.
Do I charge or reclaim VAT on commission to a UK creator?
A UK VAT-registered creator charges you 20% VAT on their commission, which you reclaim as input tax if you hold a valid VAT invoice. A UK creator who isn't VAT registered charges no VAT, and there's nothing to reclaim, but the commission is still deductible.
How do I handle VAT on commission paid to a creator outside the UK?
Use the reverse charge. The creator invoices with no UK VAT, and you account for VAT at 20% yourself: the same figure goes in Box 1 and Box 4 of your VAT return, with the net value in Boxes 6 and 7. For a fully taxable business it nets to nil.
Does paying overseas creators affect my VAT registration?
It can. The value of reverse-charge services bought from abroad counts towards the £90,000 VAT registration threshold, so growing creator spend can tip you into registration even if your UK sales alone would stay below it.
What invoice do I need from a creator to reclaim VAT?
A full VAT invoice showing the creator's VAT number, a unique invoice number, both parties' details, the tax point, a clear description of the commission, the net amount, the VAT rate and the VAT in sterling. A dashboard screenshot or a message is not enough.
Do the digital platform reporting rules make me report what I pay creators?
Generally no. Those rules apply to platform operators that connect sellers to customers, not to a brand paying commission for promotion. The reporting duty sits with platforms in respect of their sellers.
Want help getting your creator commission, VAT returns and reverse-charge entries right? Book a call with a Zmartly accountant and we'll set up bookkeeping that handles it cleanly.
