Social media and the taxman: the unlikely dangers

With many companies encouraging their employees to make positive use of social media such as Twitter or LinkedIn in order to generate interest and growth in their business.

With many companies encouraging their employees to make positive use of social media such as Twitter or LinkedIn in order to generate interest and growth in their business, it’s increasingly important to ensure that employees remain “on message” when engaging with outside interests through these platforms.

A trend has emerged amongst local tax authorities to demonstrate that an overseas business has a taxable presence in their territory. Tax authorities such as the UK’s HM Revenue & Customs are far more likely to carry out simple research (such as Googling an employee’s social media profile) to establish whether an employee’s stated position and duties reflect those portrayed by the Company in its dialogue with the tax authorities.

LinkedIn, by its very nature, is becoming an increasingly powerful resource - not only for companies, but also for employees who might wish to ‘catch the eye’ of potential employers by embellishing their role within the business.

For example, for companies that have declared that they make no taxable supplies in a country and simply have a local marketing operation, any contradictions could be costly if the tax authorities query a disparity between this stated position and a local employee claiming that they “negotiate and conclude sales contracts” in their social media profile.

Whilst most companies will already have an IT and Social Media Policy from an HR perspective, we would strongly advise employers with international operations to consider whether employees are accurately describing their role in line with their job descriptions and the company’s representation of their role.

Failure to ensure consistency could result in an enquiry from the taxman due to the unlikeliest of exposures.

For more information, please contact Melissa or Gareth:

Gareth Davis
Manager, North America
+1 415 517 7166
gdavis@fitzandlaw.com
Melissa Harkcom
Director, North America
+1 415 867 6245
mharkcom@fitzandlaw.com

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