TikTok Affiliate Commission and VAT: What UK Creators Need to Know

TikTok affiliate marketing has exploded in popularity among UK creators, but the VAT implications of affiliate commission are causing serious confusion. Getting this wrong could cost you thousands in penalties or force you into unnecessary VAT registration.

What is TikTok Affiliate Commission?

TikTok affiliate commission is when you earn money by promoting other businesses' products through TikTok Shop. You're paid a percentage when someone purchases through your affiliate link. This is different from:

• Creator income (paid per view/engagement)
  
  
• TikTok Shop sales (selling your own products directly)

With affiliate commission, you're paid directly from the shops whose products you promote.

The VAT Reality: Location Determines Everything

Here's the crucial point most creators miss: whether your affiliate commission counts towards the £90,000 VAT threshold depends entirely on where the shop paying you is located.

When Affiliate Income is Outside VAT Scope

Suppose the shop you're promoting is based outside the UK. In that case, your affiliate commission is typically considered a business-to-business supply to an overseas company, making it outside the scope of UK VAT.

This means:

• Affiliate commission doesn't count towards the £90,000 VAT registration threshold
  
  
• You don't need to charge VAT on this income
  
  
• It's treated as an export of services

Common scenarios where affiliate income is outside VAT scope:

• Promoting US-based brands through TikTok Shop
  
  
• European brands operating from EU countries
  
  
• Asian brands with no UK presence
  
  
• International e-commerce platforms

When Affiliate Income is Subject to UK VAT

However, if you're promoting shops that are UK-based or have a UK VAT registration, your affiliate commission becomes subject to standard UK VAT rules:

• It counts towards the £90,000 VAT registration threshold
  
  
• Once registered, you must charge 20% VAT on this income
  
  
• You must issue proper VAT invoices to the UK shop

How to Identify the Shop's Location

This is where many creators go wrong. You need to identify:

• The legal entity paying you - Check your payment notifications and contracts
  
  
• Their VAT registration status - UK VAT-registered businesses will have a GB VAT number
  
  
• Their business location - Physical presence in the UK affects VAT treatment

What you can identify for UK VAT liability:

• Payment from a company with "Ltd" or "Limited" in the name
  
  
• UK bank account for payments
  
  
• GB VAT number displayed on their website
  
  
• UK business address in payment correspondence

The £90,000 VAT Registration Threshold for Affiliates

You must register for VAT when your UK taxable turnover exceeds £90,000 in any rolling 12-month period. For affiliate marketers, this means only commission from UK-based or UK VAT-registered shops counts.

Example scenarios:

Creator A:

• £80,000 affiliate commission from US brands
  
  
• £30,000 affiliate commission from UK brands
  
  
• VAT threshold calculation: £30,000 (only UK commissions count)
  
  
• Result: No VAT registration required

Creator B:

• £50,000 affiliate commission from US brands
  
  
• £95,000 affiliate commission from UK brands
  
  
• VAT threshold calculation: £95,000 (only UK commissions count)
  
  
• Result: VAT registration required within 30 days

Common VAT Mistakes with Affiliate Income

Through working with hundreds of TikTok affiliates, we've identified these critical errors:

1. Assuming All Affiliate Income is VAT-Free

Many creators believe affiliate marketing is automatically outside VAT scope, missing registration requirements when promoting UK brands.

2. Not Tracking Shop Locations

Failing to identify where each shop is based makes accurate VAT calculations impossible.

3. Mixing All Commission Together

Combining UK and overseas affiliate income without separation leads to incorrect threshold calculations.

4. Ignoring Small UK Brands

Assuming only large companies have UK VAT implications, while missing smaller UK shops that count towards the threshold.

Tracking and Record Keeping for Affiliates

Proper record keeping is essential for affiliate marketers:

Essential documentation:

• Affiliate agreements and contracts
  
  
• Payment notifications showing the paying entity
  
  
• Bank statements with currency conversions
  
  
• Records of which shops are UK vs overseas
  
  
• Screenshots of shop locations and VAT numbers

Recommended tracking system:

• Spreadsheet separating UK and overseas commissions
  
  
• Monthly totals for VAT threshold monitoring
  
  
• Currency conversion records
  
  
• Shop location verification documents

When to Seek Professional Help

Consider professional advice when:

• Your affiliate income exceeds £50,000 annually
  
  
• You're promoting a mix of UK and overseas brands
  
  
• You receive payments from multiple currencies
  
  
• You're unsure about shop locations or VAT status
  
  
• You've received conflicting advice about VAT obligations

What To Do Next as a TikTok Affiliate Marketer

1. Review Your Current Partnerships - List all shops you promote and identify their locations and VAT status
   
   
2. Separate UK and Overseas Income - Create tracking systems that clearly distinguish between VAT-relevant and outside-scope commissions
   
   
3. Monitor Your Threshold - Only track UK-based affiliate income towards the £90,000 VAT threshold
   
   
4. Verify Shop Details - Confirm the legal entity paying you and their UK VAT registration status
   
   
5. Implement Proper Record Keeping - Document payment sources, currency conversions, and business expenses

TikTok affiliate marketing offers incredible earning potential, but the VAT implications vary dramatically depending on where your partner shops are located.

Many creators unnecessarily register for VAT because they include overseas commissions in their threshold calculations, while others face penalties for missing registrations when UK-based partnerships push them over the limit.

At Capture Accounting, we specialise in helping content creators navigate these complexities, ensuring you understand exactly which affiliate income counts towards your VAT obligations and which doesn't.

Contact us today for a discovery call to properly structure your affiliate income.