Crowd-funding: tax implications

Crowd-funding: tax implications

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Discussion

DanoS4

Original Poster:

863 posts

193 months

Wednesday 27th August 2014
quotequote all
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!"biggrin

Dan

wattsm666

693 posts

264 months

Wednesday 27th August 2014
quotequote all
The funds raised are equity, which is not taxable in the company. The expenditure will be tax deductible though, so you will probably have tax losses.

wattsm666

693 posts

264 months

Wednesday 27th August 2014
quotequote all
The funds raised are equity, which is not taxable in the company. The expenditure will be tax deductible though, so you will probably have tax losses.

Eric Mc

121,774 posts

264 months

Wednesday 27th August 2014
quotequote all
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.

Mattt

16,661 posts

217 months

Wednesday 27th August 2014
quotequote all
You are doing this as a company or individual?

DanoS4

Original Poster:

863 posts

193 months

Thursday 28th August 2014
quotequote all
Apologies about the delay - will be as an individual.
The intention is to use the raised funds to purchase equipment.

I'm also planning to talk to an accountant next week. Before I set the crowd-fund in motion.

Thanks for your input smile

Dan

Mattt

16,661 posts

217 months

Thursday 28th August 2014
quotequote all
Look into self employment rules then.

KFC

3,687 posts

129 months

Thursday 28th August 2014
quotequote all
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?

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?

Eric Mc

121,774 posts

264 months

Friday 29th August 2014
quotequote all
If you are not returning the money, then the money will be treated as business income and will be taxed in the usual way.

wattsm666

693 posts

264 months

Friday 29th August 2014
quotequote all
I think kick starter is an equity investment, so you issue shares

KFC

3,687 posts

129 months

Friday 29th August 2014
quotequote all
wattsm666 said:
I think kick starter is an equity investment, so you issue shares
Thats not true.

Alpinestars

13,954 posts

243 months

Friday 29th August 2014
quotequote all
wattsm666 said:
I think kick starter is an equity investment, so you issue shares
Not if he's not doing it via a company.

Mattt

16,661 posts

217 months

Friday 29th August 2014
quotequote all
Kick starter is a simple sales transaction - pay X to get Y.

Seedrs or Crowdcube are equity investments.

wattsm666

693 posts

264 months

Friday 29th August 2014
quotequote all
KFC said:
Thats not true.
You are right, I was confused with seedrs