Taxation of domain profits

[Richard K]

This won't be of concern to me for some time to come (if ever). I only got into domaining around 18 months ago, and in that time have bought a lot of domains to get myself started and only sold a handful so far ... so I won't be into profit any time soon!

That said, I am curious to know whether domain profits are taxed as income or capital gains?

I suppose a lot depends on the circumstances. In my case, I probably spend an hour or two on this most days (although there have been periods when it's been much more), and they are all bought with the intention of selling (most of them being posted on a for-sale landing page very soon after being purchased, except for a handful where I suspect they will be worth more if I wait). I don't know whether the number of domains is relevant (i.e. make it look more like a business), but if so I have nearly a thousand at the moment and for the foreseeable future will probably be maintaining it at around that level.

Sorry to trouble the good people on here with a boring tax question, but I did google it first and just ended up very confused!

 

[stevelook2]

It would depend on how you are operating.

Self Employed Sole Trader or Limited Company

Self Employed the purchase cost etc would be classed as allowable expenses, whereas the sale would go through as just that.

Whether your making a profit or not it should be declared, so it is possible to operate at a loss and declare this and there would be zero tax due,

Best advice would be to speak to an accountant

 

[Richard K]

Thanks, @Trauiner and @stevelook2, for your helpful replies. I agree with you both that as and when it becomes relevant I should ask an accountant, but a few informal pointers in the meantime are always useful to bear in mind so thanks!

 

[Lovekraft]

If you actively buy and sell then yes you are liable to paying tax. I was advised years ago anything over around 10 buys / sells is considered active.

PS - Not a professional either so always seek professional advice.

 

[WalkinDude]

https://www.theguardian.com/money/2...ee-allowances-ebay-airbnb-micro-entrepreneurs

 

[Richard K]

Thanks all for your thoughts and input – hugely appreciated

 

[William]

This is not to be taken as professional advice, but the key test for capital gains vs income tax are badges of trade - see below for reference - provided you are not registered as a company, then it gets a little more complicated:

https://www.accaglobal.com/my/en/te...urces-search/2011/august/badges-of-trade.html

 

[Richard K]

Many thanks @William, @Ben Thomas, @Lovekraft and @WalkinDude.

 

[NiceNICDomainServerNiceNICDomainServer is verified member.]

If you frequently buy and sell domain names or earn income from them, the profits are usually taxed as ordinary income. If you hold on to them for a long time and resell them, the profits may be taxed as capital gains. This depends on local tax laws, so it's best to consult a tax advisor.