Domain Name Sales - Tax Treatment

[Marcoose]

As some of you know, I've been living in Thailand for years. Well, I am now back to the UK and the UK tax system. How are domain name sales treated for tax purposes and are they VAT applicable?

Cheers, guys!

 

[alex]

I charge VAT on domain sales.

Are you trading as company or sole trader?

 

[martin-s]

VAT is applicable if you are VAT registered (turnover of £85k+)

 

[Lovekraft]

If you actively sell domains then they are eligible to be taxed.

 

[alex]

My previous follow-up was rather simplistic.

If you are VAT registered you charge VAT. If your business income is below £85k you don't need to be VAT registered, though you can opt in.

Depending whether you are a sole trader or limited company, there are implications for income tax, capital gains tax, corporation tax, revenue expenditure / capital expenditure etc, and this will also depend on how you acquired the domains, whether you're holding them to resell or whether you're holding them long-term for brand protection, website income etc.

In my specific case, I have domains in my own name and limited company name. Some were acquired and treated as capital asset, whereas those I registered are all taxed on an income basis, i.e. income tax or corporation tax.

My accountant proposed an optimal structure given my specific situation. Probably best you speak to an accountant to optimise yours.

 

[ian]

Welcome back buddy. Given the quality of the domains you have, I'd say registering as a limited company is the best option, so that you can control your personal income, otherwise you might get stung with a heavy 50% tax on a 6 figure sale. At least limited, it will be a straight forward 20% and then you can pay yourself in dividends at 7.5% up to a certain threshold. In terms of VAT, I'd suspect it is inevitable for you that you'll have to register when your annual turnover hits the £85k mark; however, factor in what your intentions are; if you are going to be buying domains, you may find many are sold except of VAT given the individual or business selling; if you cannot recover the VAT on purchases, and have to pay out on sales, then you will be worse off. If you have loads of purchases that have VAT applicable, then of course that offsets it more so.

Drop me a message on Skype when you are settled, have a catch up.

 

[Edwin]

If you're already back in the UK, there might be certain restrictions on what you can do in terms of moving assets between private and corporate ownership. Your best bet, as mentioned further up the thread, is to have a good chat with an accountant to thrash out the specifics of your situation.