Crowd-funding: tax implications
Discussion
Hi All,
Don't venture in these parts that often, but I think I need some advice.
Looking at a crowd-fund for £7.5k
I'm offering various rewards in return for the pledges.
With the funds, I'll be buying a computer and some audio kit.
I'm struggling to ascertain exactly what my tax liability will be. I'm intending to spend the lot. ie income=outgoings.
Any advice from those in the know?
Even if it is "don't touch it with a 10ft battle lance!"
Dan
Don't venture in these parts that often, but I think I need some advice.
Looking at a crowd-fund for £7.5k
I'm offering various rewards in return for the pledges.
With the funds, I'll be buying a computer and some audio kit.
I'm struggling to ascertain exactly what my tax liability will be. I'm intending to spend the lot. ie income=outgoings.
Any advice from those in the know?
Even if it is "don't touch it with a 10ft battle lance!"
Dan
Depends on the way in which you "return" the investment to those who have funded you as to how the expenditure is treated in your business - and how it is taxed in the hands of the recipients.
If you merely return the original amounts to the investors, then all you are doing is giving them back the money they originally gave you - which has zero tax implications - for them or you.
If, however, you give them a "reward" of some sort - such as interest or dividends, then the income they receive will be taxable in their hands.
HOW the tax is calculated and what responsibilities you might have in adminoistering any of the tax will depend on the nature of the "exta" amounts you pay them.
If you merely return the original amounts to the investors, then all you are doing is giving them back the money they originally gave you - which has zero tax implications - for them or you.
If, however, you give them a "reward" of some sort - such as interest or dividends, then the income they receive will be taxable in their hands.
HOW the tax is calculated and what responsibilities you might have in adminoistering any of the tax will depend on the nature of the "exta" amounts you pay them.
Eric Mc said:
Depends on the way in which you "return" the investment to those who have funded you as to how the expenditure is treated in your business - and how it is taxed in the hands of the recipients.
If you merely return the original amounts to the investors, then all you are doing is giving them back the money they originally gave you - which has zero tax implications - for them or you.
If, however, you give them a "reward" of some sort - such as interest or dividends, then the income they receive will be taxable in their hands.
HOW the tax is calculated and what responsibilities you might have in adminoistering any of the tax will depend on the nature of the "exta" amounts you pay them.
What if you're not returning the money to them at all? i.e. like Kickstarter. Would that be taxable? If you merely return the original amounts to the investors, then all you are doing is giving them back the money they originally gave you - which has zero tax implications - for them or you.
If, however, you give them a "reward" of some sort - such as interest or dividends, then the income they receive will be taxable in their hands.
HOW the tax is calculated and what responsibilities you might have in adminoistering any of the tax will depend on the nature of the "exta" amounts you pay them.
Would there be a difference depending on what the person giving you the money received? i.e. some people fund a Kickstarter for $200, and they receive $200 of product at some point down the line. I'd have assumed that would have been treated as a sale, and tax owed. But what if someone donated $200, and received say a postcard worth a dollar? Still treated the same?
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