TAX on domain address? - help appreciated

joe7777

I recently sold a domain name, for a significant ammount of money.

I've been doing lots of reading online, some people have explained that tax on domains are classed as "intangible" because it is not a physical property or even a possesion that you can touch or feel for that matter.

As you can imagine I want to take full advantage of this "intangible" concept.

Does anyone else have any information on this? and how i should go about declaring it to recieve minimal taxing costs.

I would really appreciate a genuine none envious response (possibly untaxible) from someone that may be able to help me if they were in my situation!

Thanks very much, Joe.

Rolo_Tomasi

Was this a one-off transaction or do you hold a number of domain names which you rent out or sell on a regular basis? Was the name associated with a business you run?

In either case I believe there will be tax to pay on the amount you received but which tax and how much will depend on the answers.

joe7777

it wasnt registered as a business but i did earn money from it for like 4 months which wasnt declared....
one off sale

Rolo_Tomasi

Provided the business wasn't the buying and selling of domain names then it is likely that any profit will be subject to the Capital Gains Tax rules. In the current tax year, an individual can make gains totaling £10,100 before CGT is due. If your profit is more than this then the amount over £10,100 will be taxed at (probably) 18%.

I say probably because as you wasn't trading then you would not qualify for Entrepreneurs' relief which would reduce the tax to 10% of the gain. Perhaps you should register the business after all........

joe7777

hi rolo,

i dont understand.... perhaps i should register as a business after all? I no longer earn from it and dont have any control of the domain.

So can I tax my whole lump of earnings plus the sale price in capital gains? this is well over 10,100

Thanks very much for your time, i do appreciate it

Rolo_Tomasi

You received an untaxed source of income from the website - albeit for a short period of time - and you should have declared this to the Revenue and paid income tax/nic on it. Depending on when this income commenced (whether it was this tax year or last) will determine if there are any penalties for late registration.

The benefit of doing it this way - apart from being the correct procedure - is that you have then sold a business and the money received for this will be subject to capital gains tax at an effective rate of approximately 10%. If you just declare the gain from the domain then the CGT rate will be 18%.

roger_c

Also remember you get a an annual exemption for capital gains of £10,100 in 2009/10, which will further reduce your gain! But can't tell you much more without more figures.

TM1976

You have trading income and probably a capital gain here.

Whether the asset is intangible or not is unlikely to be a factor for tax purposes.

You can use your annual exemption, your CGT exemption and possibly some expenses that you used to set up the domain in the first place.

The answer to your problem is really easy, see an accountant to work this out for you. They should help you minimise your tax bill but also stay on the right side of the law and the tax man.

Getting this done correctly in the first place will definately save you money in the long run and you will pay the tax you should pay on your earnings. As you appear to have made a decent amount of money from your venture the cost of getting the proper advice should be easily affordable to you, and you can also set this cost off against your taxable income.