"We're a sports brand doing about £1.5m. We pay creators commission on TikTok Shop, we have two sponsored athletes on annual retainers, and we give away a fair amount of kit. Our old bookkeeper put all of it in one 'marketing' line and our new one says three different treatments. Who is right?"
Partly both. At the top of the P&L, all of it is one family: selling and distribution cost, never product cost. But the three shapes of a sports deal behave differently in the accounts, because they are earned differently, taxed differently and judged differently. A per-sale creator commission is a cost of the sale it rides on. An athlete retainer is bought over time and belongs to the period it is promoting. Kit and gifting is a purchase of goods you give away, with its own small VAT rule. Get the classification right and the numbers start telling you which deals earn their place. Get it wrong and your P&L hides a simple truth: people-powered distribution is either the cheapest acquisition channel you have or the most expensive, and the accounts are the only place you can tell which.
Everything below is an illustrative example with synthetic planning numbers, not any client's books. One hard rule before we start: no fabricated results, no "we have clients who" claims. The method is what matters, and you can rerun every number with your own.
Here's the Short Version
- All athlete, creator and gifting costs sit in selling costs, in their own lines: affiliate and creator commission, athlete and sponsorship, sampling and gifting. None of it goes into product cost
- Per-sale commission accrues on the sale: 15% of the ex-tax product price, matched to the order, reduced for the returns that unwind it
- Retainers accrue over the contract term, not the payment date. A £15,000 a year athlete deal is £1,250 a month of cost, whatever the invoice timing
- On a £60 order, a 15% creator commission costs £7.50, roughly a third of what the order would contribute without creator commission. You set that rate in the Seller Centre, so set it from your contribution maths, not from what creators ask for
- Platform commission reverses on returns, and TikTok's current rules reverse the affiliate payout on refunds completed before the creator is paid; after the creator is paid, it stays paid. Model it honestly rather than as fully recoverable
- Non-UK resident athletes have a withholding regime all of their own: if they appear or promote in the UK you may have to register with HMRC's Foreign Entertainers Unit and deduct tax from payments. Endorsement and promotional payments count, even when the deal is signed with a third party
- Kit given away free is a business gift: no output VAT is due while total gifts to the same person stay at or under £50 of cost, excluding VAT, in any 12-month period, but once the total passes £50 and you were entitled to recover the input VAT, output tax is normally due on the total cost value of the gifts. Kit supplied in return for agreed promotion is non-monetary consideration instead, with its own treatment
The Three Shapes Of A Sports Deal
Every arrangement a sports brand signs with a person falls into one of three shapes, and each shape has an accounting behaviour.
| Shape | How it earns | When the cost lands | The trap |
|---|---|---|---|
| Creator affiliate commission | A rate per attributed sale, typically set in the platform's Seller Centre | With each sale, as a cost of that sale | Refund reversals are partial, and the rate stacks on top of everything else |
| Athlete retainer or sponsorship | A fee for access: promotion, content, appearances, kit use, association | Spread across the contract term | Booking the whole fee at payment date wrecks the comparison between deals |
| Performance bonuses and kit | Triggered by a result, a campaign or a use of the product | When the trigger is met, or as the kit is given | A bonus needs a present obligation, not probability alone; kit needs separate gift or barter treatment |
One naming decision keeps all three honest: their own ledger lines, kept out of both product cost and the paid ads line. The moment sponsorship sits inside ad spend, you lose the ability to compare it with ad spend. The moment creator commission sits in product cost, you lose the sight of contribution per order. Separate lines, separate judgements.
Creator Commissions: The Mechanics That Matter
Affiliate commission on TikTok Shop is calculated on the product price excluding tax, less seller-funded discounts. On a standard rated product sold at £60 including VAT, the commission base is £50, and a 15% rate costs £7.50 on every order it touches. That is the number to hold against your contribution, and it is bigger than it looks: on the worked order below, creator commission plus the net platform fee take 24% of the net revenue.
| Line, per order | No creator | 15% creator rate |
|---|---|---|
| Revenue net of VAT | £50.00 | £50.00 |
| Platform commission (9% of the VAT-inclusive order, VAT reclaimed) | -£4.50 | -£4.50 |
| Creator commission (15% of the ex-tax price) | £0.00 | -£7.50 |
| Product landed cost | -£18.00 | -£18.00 |
| Fulfilment and carriage | -£4.00 | -£4.00 |
| Returns provision | -£1.50 | -£1.50 |
| Contribution per order | £22.00 | £14.50 |
Two reflexes to build. First, price for the rate before launch, not after: a product that needs to hold £22.00 of contribution either carries the commission in its price, adjusts the rate, or does not switch the channel on. The arithmetic is in our post on modelling creator commission into pricing, and it works identically for sports kit. Second, judge creators on contribution per creator per month, not on revenue attributed. A creator sending full-price repeat customers is a different purchase from one discounting your hero product into a returns-heavy audience.
The refunds detail still catches people. The platform reverses its own commission when an order is refunded, and TikTok's current rules reverse the affiliate payout on refunds completed before the creator is paid; once the creator has been paid, it stays paid. Model the platform layer net of returns, reverse affiliate commission on refunds that land before creator payout, treat commission on later refunds as spent, and reconcile the refund lines when they appear in settlements.
Athlete Deals: Buy Promotion Like A Subscription, Not A Purchase
A retainer buys a service: promotion over a period. So the cost belongs to the period, not the day the invoice arrives. If you pay £15,000 for a year of association, your management accounts should carry £1,250 a month from the day the deal starts, regardless of whether you paid it in one go or in twelve instalments. Skip that and January's accounts carry a year of cost that February's do not, and every decision you make from those accounts is taken with one eye closed.
Performance bonuses work differently: do not accrue a bonus just because the milestone looks likely. Recognise it when past events create a present legal or constructive obligation and you can estimate the amount reliably. If your deal pays a bonus on a podium, a follower number or a sales threshold, keep the likely but untriggered amount in your forecast, and let it become a recognised cost when the obligation actually bites.
Three more athlete-specific points, all small until they are not.
Who is your supplier? The contract might be with the athlete personally, their agent, or their own company. Each one changes whose invoice you process and whether VAT appears on it. An athlete who is not VAT registered cannot charge VAT, so there is no input VAT to recover on their fee. A UK supplier that is VAT registered will normally charge 20% on sponsorship or promotional services, and you recover it like any other supplier invoice, provided you hold a valid VAT invoice and the normal recovery conditions are met. Overseas suppliers, agencies and payment chains need their own place of supply check. Neither situation is a problem, but the two are not the same cost, and your negotiation should know the difference.
Non-resident athletes are a withholding regime of their own. If you pay someone who does not live in the UK to appear or perform in the UK, HMRC's withholding rules can require you to deduct tax from the payment, as a payment on account of their eventual UK tax. It covers promotional activities and endorsements, not just the event itself: endorsement fees for equipment used at a UK tournament are the example HMRC uses. You register with the Foreign Entertainers Unit before the first payment, and the obligation can follow the money even when a third party is in the middle. If you are signing international talent, this is a five-minute check that saves a five-figure argument: ask before you promise a gross fee.
Labelling is not optional either. If an athlete is paid or gifted to post, the advertising rules expect the post to be identifiable as an ad, and both the advertising regulator and the competition watchdog have been active on undisclosed promotion. Build the disclosure into the contract and the content brief. An unlabelled post is a brand risk you paid to take on.
The Kit Question, And The £50 Rule Most Brands Miss
Kit given away has two possible treatments and one small VAT tripwire. Kit supplied in return for agreed promotion or other services is non-monetary consideration: for VAT, the brand's goods and the athlete's services are separate supplies, and the barter transaction normally needs to be measured at fair value, while the inventory itself leaves the books at its carrying amount. Kit given unconditionally, with nothing expected in return, may instead be a business gift. The rule, from HMRC's business promotions notice: no output tax on business gifts to the same person so long as their total cost, excluding VAT, does not exceed £50 within any 12-month period. If the total exceeds £50 and you were entitled to recover input VAT on the purchases, output tax is normally due on the total cost value of all those gifts, at your own expense.
Read that with a warehouse brain. A pair of trainers at £30 cost given to one athlete in March is under the threshold. A training block, a match kit and a second pair of shoes to the same person in the same 12-month period is not, and the offending item is not the last gift; it is all of them. For regular kit, document whether it is supplied in return for services or given unconditionally, because a contract does not remove the VAT issue on its own, and keep a kit issue log with unconditional gifts tracked separately for each recipient. In the accounts, kit is a cost at cost either way, inside your sampling and gifting line, and it belongs next to the deals it supports.
Putting It Together: £120,000 Of People-Powered Distribution
Here is the illustrative example: a £1.5m sports brand spending £120,000 a year on athletes, creators and kit, broken out the way it should be in the accounts. The plan below runs four athlete deals, a step up from the two in the opening scenario, because the point of the example is the structure rather than the headcount.
| Line, illustrative year | Amount | How it behaves |
|---|---|---|
| Athlete retainers (four athletes on twelve month deals) | £60,000 | £1,250 a month each, spread over the terms |
| Creator affiliate commission (15% on £300,000 of ex-VAT attributed sales) | £45,000 | Accrues per order, partial reversal on returns |
| Kit, gifting and samples at cost | £15,000 | Cost of goods given, £50 rule tracked per person |
| Total distribution spend | £120,000 | 8% of revenue, in three visible lines |
Now read it the way a founder should. The creator layer is directly measurable: £45,000 of commission against £300,000 of attributed revenue at a 40% contribution margin is £120,000 of contribution, a clear buy if the customers are genuinely new. The athlete layer is not directly attributable, and that is fine, it was never meant to be; what it must be is judged on a plan agreed up front: what the association is for (reach, credibility, a launch, a specific audience), what would count as it working, and what you will not renew. The gifting layer is small but the most slippy: without a gift log and a cost view, it grows quietly and untracked.
Then run the tax timing around it. Retainers and commissions are normally deductible as they accrue, where they are revenue expenses incurred wholly and exclusively for the trade. Contracted kit supplied for genuine promotional services is normally deductible too. Unconditional gifts need a separate check, because business gifts are generally disallowed for direct tax unless an advertising or other statutory exception applies. The accruals discipline is the whole point: the difference between tidy management accounts and a set of tea leaves is nothing more than when each cost is recognised.
FAQ
Are athlete and creator payments tax deductible for my brand?
Yes, as business promotion costs, provided they are wholly and exclusively for the business, which genuine marketing arrangements normally are. They belong in selling costs in their own lines, never in product cost. The timing differs by shape: creator commission accrues with the sale it relates to, retainers accrue over the contract term, and performance bonuses are recognised once past events create a present obligation, not merely because they look likely.
Do I have to withhold tax when paying athletes?
If the athlete is not UK resident and you are paying them for an appearance, promotion or endorsement in the UK, you may have to register with HMRC's Foreign Entertainers Unit and deduct withholding tax from the payment, even where a third party is involved in the deal. If the athlete is UK resident, the Foreign Entertainers Unit regime does not apply, but you should still check employment status, PAYE and any applicable off-payroll working rules before the first payment. On non-resident deals, check with the FEU before you pay, not after.
How do I account for free kit given to athletes?
At cost, in your sampling and gifting line, not at retail. For VAT, kit with nothing expected in return is a business gift: once the total cost of gifts to the same person passes £50 within a 12-month period, output VAT is due on the cost. Where kit forms part of a contracted arrangement, treat it as consideration under that deal and document it. Keep a per-person gift log either way.
The Bottom Line
Treat the three shapes of sports promotion the way the deals actually behave. Commissions ride their sales, with the refund mechanic modelled honestly. Retainers are spread over the time they buy. Kit is a cost at cost with a £50 rule attached and a log behind it. Keep each in its own line, judge each on the number that fits it, contribution per creator and plan-versus-aim per athlete, and know before you sign what a non-resident deal adds to your obligations. People-powered distribution can be a cost-effective source of attention when it is priced and accounted for properly, and it is a slow leak when it is not. We keep the full picture together with the returns maths in our post on returns and sizing leakage.
If you want your athlete and creator deals set up so the numbers judge them properly, that is our daily work for UK sports brands between £1m and £20m. We are specialist social commerce accountants, we see creator settlements and sponsorship contracts every week, and we will tell you plainly which deals are earning their keep. Book a call and bring your current agreements and last quarter's commission reports.