Turning a hobby into a business and transfering a domain

[bensd]

Hypothetical question -

If someone had a hobby and they had registered a domain name(s) as an "individual", then that hobby became a business.

Could they business just have the domain name(s) as it belongs to the individual?

or Would the business buy the domains from the individual (for a nominal fee) so they are then part of the business?

Also, how would this work with tax?

Cheers

Ben

 

[ratboy]

Do you own the business? and own the names?

 

[Takwa]

it depends if you're a company or a self employed.

for a company you "should" set a fair market price where the owner will have to pay capital gains.

for self employed it doesn't matter as you're the owner, it should be set at cost, and it will be treated as capital introduced in the balance sheet. you can't set the price yourself as since you're the owner of the business, inland revenue will not buy that, as you will be trying to take advantage of the annual CGT threshold.

but you can get a valuation by a professional and that should be your price, but then again owner will have to pay CGT. You can't value it yourself btw

 

[bensd]

Sorry, should have been more clear.

Say Joe Bloggs had started a hobby and as party of that hobby owned a domain (s), then he decided that hobby should be a business so started out as a sole trader.

Could he just transfer those names to his newly found company? Or would the company need to buy them?

And how would this be affected with tax etc?

 

[Jeewhizz]

As it's a sole trader, I would just change hte registrant type to reflect this.

Now, if you were going from say self employed, to Ltd., things get a bit trickier, but generally, the case is you just transfer them to the company, as it's a transfer of assets.

 

[Takwa]

for a sole trader the answer is no, the new business doen't need to buy it, because as the taxman sees it as the person is the same as his selfemployed business.

lehman's term - You can't make a profit with "Joe Bloggs" selling to "Joe Bloggs"

There be no tax on Joe Bloggs as, he haven't sold the name to anyone yet, the business and him is a single entity.

The domain name will be a asset in the balance sheet, so it will be Debit Asset Credit Capital Introduced. At the domain cost initially created by the owner as registering and renewing the domain, and of course the nominet fees. Unless the domain was used to make a profit for something else before then only the nominet fee.

Only if you start a company then there's a whole new arguable grey area.

 

[aZooZa]

If it was a valuable domain, the smart money would be on taking the ownership offshore (would have to be at fair value for the tax man) and then leasing it back to a UK business entity, while having the capital appreciation ongoing offshore. This is all fine if you make enough money to buy a house abroad, but when it comes to the repatriation of proceeds of sale, you're stymied. Talk to an accountant.

 

[bensd]

Thanks for the advice guys