Domain names. Expenses??

[LSV]

I have been searching like mad for information for a few weeks and I can´t get a grasp of things. Are domain names expenses?? assets?? or what??
(I assume it depends on how you operate your business.)

I had plans to move to the UK for the purpose of setting up a domain business. I have a small portfolio of names and wanted to start a business that buy names and monetize by parking(ppc) and by developing the names in the future. I will mostly be buying names but even selling some names.

I am interested in deducting the whole amount of a domain name purchase. I would think if it is possible to treat it as an expense then it would be good. In this way it would be easier to let the business grow as I intend to invest most of the income for purchasing more domain names, which would from what I understand lower the taxable income. (From what I have read from the Inland Revenue a domain is treated as an intangible asset.)

Anyways....how is a domain name for accounting purposes treated in the UK if you buy and sell some domain names and use them for earning ppc or for development? When is it an expense? When capital allowance be applied?

I feel like it´s not a clear thing for me and others. So....if anyone out there could fill me in it would be great. If anyone knows an accountant with experience within the domain biz then please share

Hope to hear inputs!

Regards,

LSV

 

[olebean]

LSV

It depends!

If you pay significant sums (Above £500 if i recall correctly) for them then are classed as intangible assets or goodwill and amortised. At this point they cannot be revalued at market value to suggest a asset with an increasing value! If you have regged them for a little amount then you can write them into P & L as expenses (Advertising or legal).

Disclaimer: This is not professional advice just the ramblings of an old foul. You should talk to a suitable professional

 

[developdomains]

my accountant treats domains as advertising costs, based on the fact you have to renew them every 2 years etc, just like a normal magazine/newspaper ad that has to be renewed when its run its course.

 

[Admin]

But what about your profits on parking / sales?

These have to be declared as income / less expenses, right?

 

[olebean]

But what about your profits on parking / sales?

These have to be declared as income / less expenses, right?

Full accounts should always be kept! It isn't nice going through a tax investigation especially if they want to interview you..

 

[uglygit]

Hi LSV,

our accounts in our company class domain names as 'marketing/advertising' hope this helps you.

 

[LSV]

my accountant treats domains as advertising costs, based on the fact you have to renew them every 2 years etc, just like a normal magazine/newspaper ad that has to be renewed when its run its course.

So your accountant treats the renewal fees as advertising costs. What if you buy a few domains over the year with prices ranging from 30-80k (or more) a name. How would your accountant treat such purchase?

 

[keys]

Maybe this will help,

http://www.acorndomains.co.uk/domain-research/9230-uk-tax-laws-domain-names.html

 

[olebean]

So your accountant treats the renewal fees as advertising costs. What if you buy a few domains over the year with prices ranging from 30-80k (or more) a name. How would your accountant treat such purchase?

They are capitalised as intangible assets and amortised over the useful life of the domain or if i recall correctly 5 yeare, either through a linear method or declining method.. You used to be able to write of 40% in the first year if you qualified as a SME

 

[grandin]

ownership rights

cause you don't have ownership rights then any price is merely paid on a whim...no different to special phone numbers

 

[olebean]

cause you don't have ownership rights then any price is merely paid on a whim...no different to special phone numbers

You have "control" under FRS10 that is one of the criteria..

 

[grandin]

jargon

can you talk in non jargon please....what is a frsdfddd10

 

[developdomains]

cause you don't have ownership rights then any price is merely paid on a whim...no different to special phone numbers

exactly, your renting the space

 

[Jeewhizz]

can you talk in non jargon please....what is a frsdfddd10

FRS10 sets out the principles of accounting for goodwill and intangible assets. Its aims are to ensure that:

* Capitalised goodwill and intangible assets are charged to the profit and loss account as they are depleted.
* Sufficient information is disclosed to enable users of the financial statements to determine the impact of goodwill and intangible assets on the financial position and performance of the entity.

http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD30510.htm

 

[olebean]

FRS10 sets out the principles of accounting for goodwill and intangible assets. Its aims are to ensure that:

* Capitalised goodwill and intangible assets are charged to the profit and loss account as they are depleted.
* Sufficient information is disclosed to enable users of the financial statements to determine the impact of goodwill and intangible assets on the financial position and performance of the entity.

http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD30510.htm

It doesn't just cover depletion, if covers areas where intangible assets can be re-valued upwards providing fair market valuation can be achieved and there is longevity...

 

[Jeewhizz]

I didn't understand all that.

That's why I pay an accountant to do all this for me.

 

[grandin]

impossible

impossible:- fair market valuation can be achieved and there is longevity

....based on a feeling

.... too little sales and each one is too unique

..... value is based on what you think you can do with it not what it actually does i.e. when you purchase there is nothing but air

it is only with a revenue stream can you then calculate a real value

Lee

 

[olebean]

impossible:- fair market valuation can be achieved and there is longevity

....based on a feeling

.... too little sales and each one is too unique

..... value is based on what you think you can do with it not what it actually does i.e. when you purchase there is nothing but air

it is only with a revenue stream can you then calculate a real value

Lee

Interesting comments from an individual that in involved in houses.. Totally disagree! If you look at the historical context of valuing house there are huge similarities..

 

[profrec]

Was debating about getting my text books out but can't be bothered, its been a long day.

I agree with Olebean on this.

Domain names would be treated in the same way as brand names and held as an asset if bought at reg fee they should just be expensed, irrelevent where they are expensed to.

You can only capitalize and show as an asset on the balance sheet at the value you purchased them, you cannot show a domain increasing in value this is the same principle as brand names.

If held on the balance sheet they would be classed (in the books) as belonging to you rather than being rented by you because you hold the risk of ownership. For example you are entitled to renew them first and keep them or if the value drops you take the risk of losing money. This is substance over form principle.

 

[retired_member16]

Keep it hush-hush, pay in cash were possible, keep things in your wifes name and have an off shore trust.