UK tax laws on domain names

[pooey8]

tax deductible

Hi

I have purchased 2 domain names for use in my business are you aware if the cost of these are tax deductible and if so, under what section should I claim relief.

Any feedback much appreciated

Many Thanks

Paul

 

[stender]

Totally mis read your post! please excuse me being a donut!

 

[netserve]

It sounds like the domains are being used within your business for marketing, ie you're business isn't in buying/selling domains in which case if you've paid less than £500 (thats a figure plucked from thin air as being reasonable) then write the figure off in your profit and loss account under general expenses.

If you've paid more than about £500 then you're looking at something that would have to be considered as an intangible asset to the business and you'd be looking at putting that in your balance sheet and writing it off a little bit each year over what you consider to be its useful life.

The above is the 'accounting' answer, not necessarily the same treatment that you'd use for tax as I can't think what the Inland Revenue would expect you to do with a domain you'd spent say £50K on. If it were expensive they'd probably expect you to treat it as a capital asset and write it off at 25% reducing balance basis per year.

I'd still suggest it's worth asking your accountant.

 

[lesurf]

I have had the same question on this from my accountant, is there any argument that can be used so that a domain can be written off as tax deductible rather than treated as an (intangible) asset.

For example: Say, my business area is IT Consultancy. I have been running my business happily for years trading under an unrelated trading name e.g. LeSurf Consultancy Ltd. To get some extra business I decide I want to buy a generic domain like itconsultancy.co.uk (for say £x,xxx) and redirect this traffic to my web site.

How have other people treated domains in their accounts, and what arguments have they used if they have written them off?

 

[olebean]

I have had the same question on this from my accountant, is there any argument that can be used so that a domain can be written off as tax deductible rather than treated as an (intangible) asset.

For example: Say, my business area is IT Consultancy. I have been running my business happily for years trading under an unrelated trading name e.g. LeSurf Consultancy Ltd. To get some extra business I decide I want to buy a generic domain like itconsultancy.co.uk (for say £x,xxx) and redirect this traffic to my web site.

How have other people treated domains in their accounts, and what arguments have they used if they have written them off?

There is also the question should they be amortilised at all?

 

[lesurf]

I don't actually think there is a definitive answer as to whether the purchase of a domain name is tax deductible or not. Moreover, I think if you rang the IR they probably wouldn't know either.

This thread (below) sums up the confusion but at least does go through some relatively solid arguments either way:

Domain Names on Balance Sheet - UK Business Forums

 

[Pred]

Hi,
obviously if you are a domainer then you buy & sell (some rent).
You will either make or lose money on each domain & as such, these business transactions are the same as if they were loaves of bread etc being bought or sold at a loss or profit. The taxman want's his slice too
However your question i think is if you have layed out cash for domains you will just use. A novel idea lol
I think as one chap mentioned earlier you could treat it like a depreciating asset, like a van etc. But in years to come it may be worth a lot more though. It's a domain, so it's likely.
How about you treat it like shares. I know we 'rent' domains officially, but then we do get a certificate of ownership, certainly for .uk domains.
I'm self-employed & have had losses on shares before & written them off against profits in other areas. My accountant said this was cool & the taxman was happy too.
How about write the purchase off against any profits this time around & if you sell in the future at a profit, you can counter against losses in other areas.
The tax man wil probably see it as a necessary purchase, like marketing.
If you ever sell the business, the domain is one of the cornerstones.
However it starts getting tricky again lol
It's like football clubs , they don't count the players when being valued, in most cases they are the most valuable inventory though.
Unless you're a Charlton fan like me. There, i said it!
Hope there's some ideas for you.
cheers
Pred

 

[lesurf]

Thanks Pred, some useful ideas there to pitch at the accountant.

In my case it's a domain that will be used and is likely to increase in value. I think you might right for to write it off this year as "marketing" and then if I ever sell it take the hit.

I think it would be highly unlikely that I would sell the domain separate from the overall business which as you say is where it begins to get tricky! I think it must then be classed as an intangible asset. I wonder how the accountants dealt with boo.com - they went out of business but the domain has been used (bought?) by others, checked there today and it says "coming soon...."

Did your accountant use any particular section under which to claim relief or was it just put down and argued as "marketing expenses"?

 

[olebean]

Hi,
obviously if you are a domainer then you buy & sell (some rent).
You will either make or lose money on each domain & as such, these business transactions are the same as if they were loaves of bread etc being bought or sold at a loss or profit. The taxman want's his slice too
However your question i think is if you have layed out cash for domains you will just use. A novel idea lol
I think as one chap mentioned earlier you could treat it like a depreciating asset, like a van etc. But in years to come it may be worth a lot more though. It's a domain, so it's likely.
How about you treat it like shares. I know we 'rent' domains officially, but then we do get a certificate of ownership, certainly for .uk domains.
I'm self-employed & have had losses on shares before & written them off against profits in other areas. My accountant said this was cool & the taxman was happy too.
How about write the purchase off against any profits this time around & if you sell in the future at a profit, you can counter against losses in other areas.
The tax man wil probably see it as a necessary purchase, like marketing.
If you ever sell the business, the domain is one of the cornerstones.
However it starts getting tricky again lol
It's like football clubs , they don't count the players when being valued, in most cases they are the most valuable inventory though.
Unless you're a Charlton fan like me. There, i said it!
Hope there's some ideas for you.
cheers
Pred

IMPO

Hehe The problem with players is the valuation method... in some cases the value of players is relative to statistically analysed performance, companies revenue and the players previous or remaining contract...

In the case of domains, they are either a consequence of contractual terms... selling a domain as I suggested in another post You effectively sell the remaining period of the contract which has obligations and rights attached to a string of characters...

How does this affect UK tax... Well if its a cheap name and you want no assets attributed to the business write it off as legal expenses or advertising

If you want assets in your business.... Unless you paid a significant amount for it i.e. over £500 (If i remember correctly) it shouldnt be treated as an amortilisable asset...


The problem at the in treating domains like assets is there is no recognised methodology for measuring the value of domains in order to suggest they can be treated in a similar fashion as property .... I.e. that they increase in value or retain value of a significant period approx 20 years

So... really you have no choice but to write off and re-introduce on a completed sale for cheap domains...

The only choice you have is the method for writing off but thats another story

just to cover myself this does not constitute advice etc etc etc

 

[Pred]

At the end of the day it's a transaction when bought '&' when sold. Keep a record of both & they can be offset against each other. Or if not selling offset the loss & keep forever, or certainly for a number of years.
By the sounds of it you will be anyway, or would sell the business & the domain together.
At the end of the day I'm sure the owner of Imperia Vodka will have his 'talented' accountant offset the $3 million purchase price of vodka.com
Being a billionaire, i doubt he'll lose any sleep though. :mrgreen:
It comes into the expenditure of almost all companies now i would have thought. It's pretty standard.
Pred :-D

 

[olebean]

I wish it was that simple.. FRS limit the application of use within P&L ... So might suggest that writting it off is a wise move... domains or the contract could be an asset that increases in value... in that case and depending on the organisations wish... should it be written off or used to indicate a business that has greater assets?

Business.com is a case in point... is it worth 7.7m now? If it was valued higher could that be used to raise capital? To use that capital to finance other business activity?

 

[lesurf]

Thanks guys, interesting debate.

Do any accountants frequent these boards?

 

[bb99]

Do any accountants frequent these boards?

Yes, but we don't like to admit it

 

[Will123]

Hi all,

My knowledge of it is that:

1) if your business trades in buying and selling domains, then they would be hitting the P&L account each year, and you would not treat them as capital expenditure. At year end you would treat the domains as stock/inventory.

2) if you do not trade in domain names but instead buy one to use as your electronic store front, then you could class them as capital expenditure, in which case you could choose to write the purchase price off over x years. However, you would only want to do this if purchase price was significant - as others have suggested maybe £500? Maybe less, it really is up to you, so long as you employ a consistent approach.

Obviously, in the second instance, you could find yourself facing capital gains tax (when you sell), which may be more expensive than it hitting your P&L account in the year you sell the domain.

Please don't rely on my word though, get it checked by your accountant.

Will

 

[Pred]

Hi all,

My knowledge of it is that:

1) if your business trades in buying and selling domains, then they would be hitting the P&L account each year, and you would not treat them as capital expenditure. At year end you would treat the domains as stock/inventory.

2) if you do not trade in domain names but instead buy one to use as your electronic store front, then you could class them as capital expenditure, in which case you could choose to write the purchase price off over x years. However, you would only want to do this if purchase price was significant - as others have suggested maybe £500? Maybe less, it really is up to you, so long as you employ a consistent approach.

Obviously, in the second instance, you could find yourself facing capital gains tax (when you sell), which may be more expensive than it hitting your P&L account in the year you sell the domain.

Please don't rely on my word though, get it checked by your accountant.

Will

sounds good to me will.
Pred :-D

 

[Beasty]

The legal status of .uk domains is (IMHO) unclear. .com domains can - since sex.com - be treated as property.

Nominet state (and want - I suspect for the same liablity reasons that teh .com reg resisted in sex.com) that a .uk domain is merely a contractual right - not a property right. If that is so, they differ from other IP assets - such as registered trademarks or goodwill - which are intangible property.

Others feel that they are in fact property and indeed a case was taken to the Court of Appeal on this last year - but it seems to have disappeared.

How any of the above might affect tax questions, I have no idea - ask an accountant or (if you are really brave) the inland revenue! :twisted:

 

[grandin]

thats right

thats right beasty...the county court judge referred the case up the line...i was under the impression that nominet were going to say their piece. It was suppose to be heard after the summer...did it ever happen? did either side pull out?

Lee

 

[sneezycheese]

The legal status of .uk domains is (IMHO) unclear. .com domains can - since sex.com - be treated as property.

Nominet state (and want - I suspect for the same liablity reasons that teh .com reg resisted in sex.com) that a .uk domain is merely a contractual right - not a property right. If that is so, they differ from other IP assets - such as registered trademarks or goodwill - which are intangible property.

Others feel that they are in fact property and indeed a case was taken to the Court of Appeal on this last year - but it seems to have disappeared.

How any of the above might affect tax questions, I have no idea - ask an accountant or (if you are really brave) the inland revenue! :twisted:

...The nice folk at HM Revenue & Customs have kindly put this on their website:

"Intangible assets can include domain names and trademarks."

Further details can be found here:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&columns=1&id=HMCE_PROD1_024503

...Puts an interesting 'spin' on things!

Regards,

Sneezy.

 

[olebean]

...The nice folk at HM Revenue & Customs have kindly put this on their website:

"Intangible assets can include domain names and trademarks."

Further details can be found here:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&columns=1&id=HMCE_PROD1_024503

...Puts an interesting 'spin' on things!

Regards,

Sneezy.

Subject to IFSR :twisted:

 

[Beasty]

thats right beasty...the county court judge referred the case up the line...i was under the impression that nominet were going to say their piece. It was suppose to be heard after the summer...did it ever happen? did either side pull out?

Lee

This is a curious one. Mr Plant applied for permission for leave to appeal. This was heard by Lord Justice May in the court of appeal - who adjourned saying (in essence) this was an important point of general interest and should be heard by a full court of three judges - at least two of whom shold be LJ of Appeal. If leave were granted - the full hearing would follow straight afterwards.

Nominet then asked to be allowed to take part as in interested (neutral?!) party - and at that stage LJ Jacob decided to hear the application for leave on his own. I have yet to see a judgement - but understand that he refused leave to appeal - despite the fact that LJ May had already ordered that the decision be a three judge one.

On the face of it - one LJ of Appeal trumping another one - even though they are of the same rank! What has happened next I don't know - but you have sparked my curiosity enough to try to find out...