Donate button on website. Tax implications?
Discussion
Most of us have seen it - a website of some sort that someone puts a lot of time and effort into and allows people to enjoy free of charge, with a 'donate' button so anyone who wants can contribute toward the cost of the site's upkeep. My question is, does someone who receives donations have to manage them in the same way that one would have to manage an earned income, specifically with regard to tax?
Eric Mc said:
Yes.
It's normal business income - part of "Sales".
That may be true in some cases, but not all.It's normal business income - part of "Sales".
It really depends on the motive of the website provider (ie does he pass the "badges of trade") as well as the relationship between the parties - as there is nothing contractual or in fact binding in any way I find it difficult to see how a genuine donation could be taxable if it isn't a business receipt.
David
Suppose I set up a website from which people could download my music free of charge, and included a 'donate' button so people could contribute to my production costs if they so wished? I've no desire to evade taxes - hell! I'd be delighted to make a taxable profit - but what I would like is the opportunity to be able to avoid the hassle and expense of processing tax returns where any incomings were merely contributing toward my costs as opposed to covering them entirely and leaving me with a surplus.
sumo69 said:
That may be true in some cases, but not all.
It really depends on the motive of the website provider (ie does he pass the "badges of trade") as well as the relationship between the parties - as there is nothing contractual or in fact binding in any way I find it difficult to see how a genuine donation could be taxable if it isn't a business receipt.
David
There will always be some grey areas as to whether the site is part of or belongs to an overall trading entity.It really depends on the motive of the website provider (ie does he pass the "badges of trade") as well as the relationship between the parties - as there is nothing contractual or in fact binding in any way I find it difficult to see how a genuine donation could be taxable if it isn't a business receipt.
David
If the site is part of a business, then donations would become part of the normal business income.
If the site is NOT a business - or does not CONSIDER itself to be a business - then the donations MIGHT not be taxable. However, just because someone considers themselves not to be trading does not mean that they aren't.
It all depends on whether they pass the "badges of trade" tests (as mentioned by Sumo).
It's a bit like e-bay sellers. Many are not trading as they are only selling stuff they bought for themselves which they are now getting rid of - probably at a loss. HMRC would not be concerned about such activity.
However, if the seller is buying stuff with the intention of selling it on, then he/she is trading. If they have their own website for such activities AND they accept donations for the site, then those donations would be part of the trading income.
The real exception would be donations to a charity - as charities are generally tax exempt (but NOT VAT exempt).
MitchT said:
Suppose I set up a website from which people could download my music free of charge, and included a 'donate' button so people could contribute to my production costs if they so wished? I've no desire to evade taxes - hell! I'd be delighted to make a taxable profit - but what I would like is the opportunity to be able to avoid the hassle and expense of processing tax returns where any incomings were merely contributing toward my costs as opposed to covering them entirely and leaving me with a surplus.
Sounds like business income to me.Is there any de minimis guideline?
As I read it the OP is looking to cover his costs rather than make a profit. All those costs would be tax deductable. The OP could register as a sole trader and fill out returns as such but would suffer a loss every year - where would be the point in going to the effort.
As I read it the OP is looking to cover his costs rather than make a profit. All those costs would be tax deductable. The OP could register as a sole trader and fill out returns as such but would suffer a loss every year - where would be the point in going to the effort.
There are no de minimis levels. If someone sets up an activity WITH A VIEW TO MAKING A PROFIT - then they are trading and need to notify HMRC etc.
Note - they don't HAVE to make a profit, they only have to be TRYING to make a profit.
If someone embarks on a project and HMRC picks them up for failure to notify, they will have to prove to HMRC that -
a) they haven't made any profits
b) they never intended to make profits
Note - they don't HAVE to make a profit, they only have to be TRYING to make a profit.
If someone embarks on a project and HMRC picks them up for failure to notify, they will have to prove to HMRC that -
a) they haven't made any profits
b) they never intended to make profits
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