Invoicing for sponsorship deals

Whether you're a seasoned pro or about to secure your first sponsorship deal, getting your invoicing right is crucial. The process can be tricky, especially when talent agencies or managers are involved. Fortunately, at StarBox, we’ve been supporting creators and influencers for over a decade. Here's a breakdown of the key things you need to know to keep your invoicing on track.

‍Going Solo: Invoicing directly with brands

Many creators work directly with brands and partners. While this may seem straightforward, there are several important factors to keep in mind.

Are you VAT registered?

If you're working with UK-based brands and are VAT registered, you’ll need to charge 20% VAT on your invoices. However, if your customer is located outside the UK, the supply of services might fall outside the scope of UK VAT under the place of supply rules.

Not VAT registered yet? Keep an eye on your turnover to ensure you don’t exceed the VAT threshold.

Stay on top of payment terms

Late payments are notorious and a reality in this industry. Make sure your contracts and invoices clearly define payment terms. If you experience late payments, remember that you’re entitled to charge interest - currently 8% above the Bank of England base rate.

Working with international customers

As a creator with a global audience, comes international business. If you're working with customers overseas, they may need proof of your tax residency to fulfil their withholding tax obligations. Failing to provide the correct documentation can result in taxes being withheld from your payments.

For US customers, you’ll typically need to submit a W8BEN form (or W8BEN-E for companies) to avoid tax withholding. Creators on platforms like YouTube and Twitch may already be familiar with this.

For UK/EU customers, it's becoming more common to require a Certificate of Residency from HMRC, so be sure to request it in advance - it can take weeks or months to arrive.

Dealing with currencies and banking fees

Creators often get paid in multiple currencies, and this can impact your earnings. Think about what currency you are contracting and invoicing in and what the consequences of this are. Be sure to check your bank’s fees for receiving foreign currency payments. You might even consider opening a foreign currency account to avoid excessive charges. Don’t forget to compare exchange rates—this can be a hidden cost that’s easy to mitigate.

Working with an Agency: Agent vs. Principal Invoicing

Agencies and managers can provide valuable support, from securing deals to negotiating contracts to content reviewing and offering legal advice. However, this can come at a significant cost to your business, so you need to consider if this is the right choice for you. Every situation is unique.

From an invoicing perspective, the most important step is determining who is the principal in the contract with the brand. This will dictate the flow of services being provided and the subsequent invoicing arrangements, this is also known as agent vs principal.

The Agent Structure

In an agent structure, you are still the direct party contracting with the brand.This means your business will issue the invoice for services to the brand.(Refer to the key considerations above for details.) The agent or manager,having sourced the deal as part of their service to you, will then invoice you separately for their commission.

Let’s say both you and your agent are VAT registered, and you've just secured a £1,000 sponsorship deal with a UK brand. Your agent has a 20% commission agreement in place. Here's how the invoicing and contractual structure would look:

  1. Contract between you (the talent) and the brand.
  2. Invoice from you to the brand: £1,000 + VAT (£1,200 total).
  3. Contract between you and your agent.
  4. Invoice from your agent to you: £200 + VAT (£240 total).

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This setup ensures clarity in invoicing and compliance with VAT regulations.

Principal Structure

In a principal structure, the agency contracts directly with the brand, overseeing a marketing campaign and collaborating with creators like yourself to achieve the desired exposure.

For example, let’s say the agency secures a £1,000 deal with a brand and allocates 80% of the budget to you, the creator. Here's how the invoicing would work:

  1. Contract between the agency and the brand.
  2. Invoice from the agency to the brand: £1,000 + VAT (£1,200 total).
  3. Contract between you (the talent) and the agency.
  4. Invoice from you to the agency: £800 + VAT (£960 total).

In both this and the agent structure, you’ll end up with £960 in your account, and a net£160 due to HMRC for VAT. However, things can get complicated if all payments pass through your agent, and you receive £960 as a single transaction.

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When it comes to invoicing, contracts are king—not the cash flow.

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It might seem like it doesn’t matter as long as everyone, including HMRC, gets the right amount of money, but this is incorrect and could lead to serious issues.

Why invoicing correctly matters

There are several reasons why getting your invoicing right is critical:

  • VAT compliance: HMRC expects VAT to be correctly charged and reclaimed. Missteps can lead to penalties, especially if one party is not VAT registered.
  • Contractual disputes: If things go wrong, your invoicing records will determine who is financially and legally responsible.
  • Self-billing  agreements: If your agent invoices on your behalf, ensure you have a signed self-billing agreement. This is often a legal requirement for VAT-registered businesses.

 Additional tips for sponsorship deals

  • Always follow ASA (Advertising Standards Agency) guidelines for sponsored content. Missteps here can lead to fines or reputational damage.
  • Knowing who you’re invoicing makes it easier to chase payments.
  • If your agent charges VAT, consider registering for VAT to reclaim this from HMRC. This can be especially helpful if most of your sales are business-to-business.

Invoicing can be complex, but with the right processes in place, it doesn’t have to be stressful.

Need help simplifying your sponsorship invoicing? Contact StarBox for expert advice and get everything set up correctly from day one.

 

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Author
Nick Tebb