Tax for domainers

[markb]

Just had a quick question for people who buy and sell domains as a full time job.

Do all domains that you buy go through your business as outgoings? So if you make £50k in one year from domain sales, but spend £20k on buying new domains, should you only pay tax on £30k ?

Thanks

 

[ian]

Technically yes, but you'd have a personal allowance so only pay tax after the first ~£10k and NI after the first ~£8k (guestimate, long time since I've had to deal with this kind of stuff). I suspect a few domainers will keep buying domains at the end of a financial year to reduce the tax liability, but ultimately it will require paying eventually!

Obviously could be completely different for those registered as a business (limited company) where rates and thresholds are different.

 

[martin-s]

If you spend £20k on £5 domains, you'd only pay tax on the £30k profit, but if you bought 4 x £5k domains, you wouldn't necessarily be able to expense the full cost in the first year. Talk to your accountant and they will explain

 

[markb]

Thanks for the advice, I'm meeting with my accountant tomorrow and will discuss further.

 

[Retired_member41]

If you spend £20k on £5 domains, you'd only pay tax on the £30k profit, but if you bought 4 x £5k domains, you wouldn't necessarily be able to expense the full cost in the first year. Talk to your accountant and they will explain

Would you only pay tax on the £30k if you had sold all the domains you spent £20k on?

If you still had domains in stock you would pay tax on all your profit.

 

[tifosi]

Domain sales/purchases as non-depreciating assets. There might be other terms for that such as capital asset purchase / sales.

Renewals as revenue expenses.

Different parts of the balance sheet & P/L.

I've got it set up for 'cash basis' with HMRC so everything goes into the tax year it's accounted to. No rolling invoices or 30-90 days etc. Works better for domains (and the freelance work ) I do.

Admittedly would like to make 50k on domain sales!!

 

[markb]

Would you only pay tax on the £30k if you had sold all the domains you spent £20k on?

Thats just confusing me even more now, If I had then sold the domains I spent £20k on, then my earnings would be higher than £50k.


I just wanted to know, as I actually spent around £60k last year on domains, even though buying and selling domains is not my main business. Could I put this £60k down on my accounts as expenses, to lower my tax bill?

 

[martin-s]

It's all about the assets you are left with at the end of the year. Any non-consumable purchase above £50-100 should be treated as an asset, rather than just an expense - then depreciated/amortised accordingly.

 

[markb]

It's all about the assets you are left with at the end of the year. Any non-consumable purchase above £50-100 should be treated as an asset, rather than just an expense - then depreciated/amortised accordingly.

ok, thanks. I think that is what my accountant was trying to explain to me last year.

 

[Retired_member41]

Thats just confusing me even more now, If I had then sold the domains I spent £20k on, then my earnings would be higher than £50k.





I just wanted to know, as I actually spent around £60k last year on domains, even though buying and selling domains is not my main business. Could I put this £60k down on my accounts as expenses, to lower my tax bill?

As buying and selling domains forms part of your business then no.

If you just bought them and used them with no resale then you could, but your disposals would still negate lots of it. Any clever accounting would be evasion.

The reality is if you've spent as much on expenses as you can and you have profit there is no getting away from it.

Unless of course you invest it to save tax

Why not invest £200,000 a year in VCT's , it will knock £60k off your tax bill, wait five years and no cgt to pay and tax free dividends.

I'm personally poor so you shouldn't take any advice from me lol

Martin seems much more sensible.

 

[Lovekraft]

My understanding is that you can only put a domain registration cost / purchase against expenses either once the registration period has ended and it has been renewed / expired or if the domain has been resold. So often a domain you register or buy today won't necessarily be accounted against expenses in this current tax year unless it's been resold, it may be a couple of years before you account for it.