Domains and Income Tax Returns

[Takwa]

Do you classify domains as an asset or a cost when you file your self employment in the Tax Returns?

 

[GreyWing]

I think you put them under both mate, I did when I filled mine in last year.

Kind Regards
GW

 

[acceleratoraccelerator is verified member.]

I've always regarded my domain purchases as costs so far. However, that's just something I decided to do, I haven't taken professional advice (yet).

Rgds

 

[GreyWing]

Sorry misread what you meant, only answer to it is that their is no answer to it. Nominet class it as their property and you never own it, the inland rvenue say you have control over it and therefore it is an asset.

Still a grey area as I called the inalnd rev last year and they said it doesn't really matter as long as you register it when you sell it.

flip a coin to be honest mate

 

[matmat is verified member.]

I put it down as costs like stock

 

[Takwa]

So the reg fees will be class as stock or asset and so it won't be realised until a sell?

 

[retired_member12]

So the reg fees will be class as stock or asset and so it won't be realised until a sell?

You don't own them, and neither do Nominet, who consider them akin to a telephone number (a stance soon to be re-enforced with the introduction of the ENUM system, how nice!).
Reg fees are an investment cost. If you develop a site to earn revenue from, the set-up cost is also an investment cost. Revenue from Adsense, affiliate marketing, etc are liable for tax against the business profits, or a straight forward taxable income for the non-limited self employed, offset against costs.
A one off genuine private sale of the domain name can be offset against CGT, the remaining (if you had a big enough sale) against earnings.
If registered intending to profit, and in particular with multiple registrations as a straight business activity, IR only interested when you sell, as a non-declare is evasion. Only my personal take on it, of course, you'd need to take proper advice!
Remember, the IR have long arms if you don't pay your tax liability, and they can chase you for non-payment going back many years. Once they have their teeth into you, they have a habit of not letting go.

 

[Jeewhizz]

A one off genuine private sale of the domain name can be offset against CGT, the remaining (if you had a big enough sale) against earnings.

I had my accountant query this.

Basically, HMRC said this:

If Mr X works in an unrelated industry (e.g. was an accountant for example), and bought a domain name without the intention of selling it on for profit, then it can go under CGT if sold.

However, if Mr X is in the IT/Internet industry, then it would be considered as normal income, and thus not eligible for CGT.

Jee

 

[ScottJ]

When I spoke to HMRC on the phone I was told if purchased for business use or leasing or developing and not for resale then to keep records and treat as CGT if ever selling.

 

[retired_member12]

The thing to remember with applying CGT is if you subsequently sell a second domain name, then the private sale arguement of the first sale flies out of the window.
The IR would treat both as a trend pointing to a business activity, and come after you for the tax you should have paid on the first domain, whether or not your intention was to take sly advantage of a CGT allowance. CGT is a 'circumstance' related tax, not an 'earnings' related one. It's up to the individual to be sure what they are committing to when they determine they can apply this to the transaction.

 

[matmat is verified member.]

Quick Google search.....

I purchased a domain name a couple of years ago and have now sold it. Is it treated as a capital gain?

Yes, unless you were trading in them, then it would be income tax or Corporation Tax.

You may be able to deduct expenses against the Capital gains on the realisation of your asset. For example if you advertised your domain name, or had to have upkeep of it.