Lumanu is a modern talent payments platform that eliminates administrative headaches when working with global influencers, creators, freelancers, and other talent. Lumanu acts as a single vendor for managing marketing freelancers, handling all vendor onboarding, payment processing, and tax compliance. This includes supporting the UK VAT reclaim process so let’s dive in!

Disclosure: The following is for informational purposes only and should not be considered legal guidance. Consult with your tax or legal professional for specific guidance.

What is UK VAT?

UK’s Value Added Tax (VAT) is a consumption tax applied to most goods and services in the UK. The standard UK VAT rate is 20% and assuming certain conditions are met, must be charged on invoices as well as reported and remitted to the HMRC.

VAT registered freelancers (e.g. influencers, affiliates, creative production specialists) must include VAT on their invoices. Marketers know that as programs and campaigns scale, that 20% VAT adds significant upfront costs. However the VAT paid by businesses can be reclaimed and used as an offset on VAT owed (VAT the business has charged their customers and owes to the HRMC). In other words VAT paid can offset VAT collected and owed.

Which businesses are NOT eligible for VAT reclaim?

Most VAT-registered businesses can reclaim VAT on eligible expenses. Some businesses and industries are restricted from reclaiming VAT because they have VAT-exempt status. This means they do not charge VAT on their services and cannot reclaim VAT on their purchases. These industries include:

• Financial services & banking (e.g., HSBC, Barclays, investment firms)

• Insurance & reinsurance companies (e.g., Aviva, Allianz)

• Private healthcare providers (e.g., private hospitals, dental practices, opticians)

• Education institutions (e.g., universities, private schools, tutoring companies)

• Charities & nonprofit organizations (unless they run taxable activities)

• Residential property rentals & housing associations (e.g., landlords, rental property companies)

• Betting & gambling businesses (e.g., casinos, online betting platforms)

These businesses still have obligations when working with freelancers to ensure compliance with UK tax laws. These businesses must determine the VAT status of the freelancers they work with.

If freelancers they work with are VAT-registered, these businesses still pay 20% UK VAT (but cannot reclaim it). If the freelancer is not VAT-registered, no VAT will be charged on the invoice.

Who Can Reclaim VAT?

For a business to reclaim VAT on payments made to vendors or suppliers (including influencers, agencies, or other marketing vendors of freelancers) there are 3 things that need to happen:

1. The business must be VAT-registered – Only VAT-registered businesses can reclaim VAT from HMRC.

2. The supplier (payee) must be VAT-registered – If the supplier is not VAT-registered, they cannot charge VAT, and the business cannot reclaim it.

3. A valid VAT invoice must be provided – The invoice must meet HMRC’s VAT requirements, including:

How the VAT Reclaim Process Works

After receiving and paying a VAT invoice, a business can reclaim VAT from HMRC by following these steps:

Step 1: Receive a VAT Invoice and verify it is compliant

• When a brand hires an agency, influencer, or freelancer, they must receive a compliant VAT invoice from the supplier.

• The invoice must meet HMRC’s VAT requirements, including:

• A clear breakdown of VAT charged. *Note that the invoices for marketing services and VAT can be separate invoices.

• The freelancer/vendor name, address, and VAT number.

• The customer/buyer details (business name & address).

• A unique invoice number and issue date.

• Important: If any of these elements are missing, HMRC may reject the VAT reclaim request during an audit.

Step 2: Pay the Invoice (Including the proper VAT)

• The invoice should include VAT at 20% (UK rate)

• Example:

  • A UK agency hires a content creator for £10,000.

  • The influencer is VAT-registered and invoices £10,000 + £2,000 VAT = £12,000 total. As mentioned above, the £10,000 and £2,000 VAT could also be sent in two different invoices.

  • The agency pays £12,000 upfront.

Step 3: Submit VAT Return to HMRC

• At the end of the VAT quarter, the business reports the VAT paid in their VAT return.

• The agency includes the £2,000 VAT paid as input tax in their HMRC filing.

Step 4: HMRC Refunds the VAT

• Once the return is processed, HMRC refunds the VAT or offsets it against the company’s VAT liability.

• From an accounting perspective, the business effectively reduces campaign costs, lowering the total spend from £12,000 back to £10,000.

VAT Reclaim Mistakes to Avoid

Brands and agencies can miss out on VAT refunds due to compliance mistakes. Here are the most common errors:

1) Invoices with missing or incorrect VAT registration information

VAT can only be reclaimed if the supplier (payee) is VAT-registered. If a freelancer or influencer is not VAT-registered, they should not charge VAT. IF they mistakenly add VAT to their invoice, or if their VAT number is incorrect it cannot be reclaimed.

2) Invoices Without VAT Breakdowns

VAT invoices must list VAT separately (e.g., £10,000 + £2,000 VAT). If VAT is not itemized, HMRC may reject the reclaim request.

3) Invoices from Non-Registered Suppliers

Always inquire if an influencer, freelancer, or agency is VAT-registered before assuming VAT can be reclaimed. Brands cannot reclaim VAT on payments to suppliers below the VAT threshold of £90,000 turnover per year

Common Challenges in VAT Reclaim for Brands & Agencies

Brands and agencies can fail to reclaim VAT due to compliance errors. Here are the top challenges:

Problem: Influencers Are Not VAT-Registered
Solution: Before making payments, verify whether an influencer is VAT-registered. If they are not VAT-registered, VAT cannot be reclaimed, meaning VAT should not be included on the invoice.

Problem: Incorrect or Missing VAT Invoices
Solution: Ensure that all invoices include VAT breakdowns, the supplier’s VAT number, and correct company details. Companies should reject non-compliant invoices and request corrections before making payments.

Problem: Manual VAT Verification is time consuming
Solution: Many agencies process thousands of invoices per year, making manual VAT verification time-consuming and prone to errors. Automating or working with a solution which manages VAT verification and invoice compliance reduces the risk of missing out on reclaimable VAT.

How Lumanu helps brands & agencies with VAT compliance and reclaiming VAT paid

Managing VAT compliance when working with influencers and other marketing freelancers can be time-consuming and complex, especially for brands and agencies working with dozens or hundreds of creators. Ensuring proper VAT invoices, verifying freelancer VAT status, and handling multiple payments can create administrative burdens—and mistakes can lead to missed VAT reclaims or HMRC compliance issues.

Lumanu simplifies the VAT invoicing and verification process. Lumanu helps brands and agencies ensure full VAT compliance while making payments seamless.

For UK → UK transactions, Lumanu provides a seamless process for brands and agencies to onboard and pay freelancers while ensuring that VAT compliance is met. Lumanu streamlines the process by:

• Handling all vendor onboarding and VAT verification

• Simplifying the invoicing process by allowing brands and agencies to fund Lumanu with a single invoice

• Automatically creating VAT compliant invoices and saving time by reducing potential errors

• Providing all VAT compliant invoices to make the reclaim process easy

• Supporting reporting and reconciliation by campaign, project and time period

How Lumanu supports UK VAT reclaim:

1. Lumanu verifies each freelancer’s VAT registration status before processing payments.

2. Lumanu automates the process for freelancers to issue VAT invoices (if VAT-registered).

3. Lumanu ensures that only valid VAT invoices are accepted, reducing errors.

4. The brand reclaims VAT directly from HMRC based on invoices received.

5. Lumanu separates the payment process from VAT reclamation by providing detailed individual VAT invoices for all freelancers while enabling companies to receive a single invoice for all payouts for a given campaign or project

With Lumanu brands and agencies maintain a direct relationship with freelancers and VAT reclaim remains straightforward if invoices are correctly issued. Lumanu removes the manual work of VAT verification.

Why Work with Lumanu?

1) Ensure Maximum VAT Recovery:
Avoid VAT reclaims being rejected due to missing or incorrect invoices. Receive fully compliant VAT invoices, making it easy to claim back 20% VAT from HMRC.

2) Eliminate Compliance Risks:
Avoid HMRC penalties due to improper VAT handling.Freelancer VAT status is verified before payments, preventing errors.

3) Save Time & Reduce Admin Burden:
No need to chase freelancers for correct invoices. No need to manually verify VAT numbers for each freelancer. Focus on running campaigns instead of dealing with VAT compliance.

Next Steps: Want to Maximize Your VAT Recovery?

💬 Let’s Talk! Connect with Lumanu to learn how we can simplify VAT compliance for your influencer marketing, creator, creative production or UCG campaigns.