Is my income taxable?

_chris_3

Albermarle said:

_chris_3 said:

Jeremy535897 said:

If you have no contract with this person to provide anything to him, and he would receive nothing even if you one day made a lot of money for them, you could argue that they are not part of your business, which I assume consists of doing a similar sort of work but for which you do provide a service in return for payment.
Equally, any costs relating to the websites are not an expense of your business, which might affect the amount you can claim in respect of computer equipment, use of home etc.
However, if you are free to sell these websites and, if you did so, they would be treated as part of your taxable income, then it may be that these sums you "invoice" are more in the nature of a grant, and would therefore be taxable. See: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40451

Thanks, I can see the argument to call it a grant but AFAIK grants require a return for the money. My situation does not require anything as such, he is simply supporting us to continue our own work.

I guess you could argue that it's not part of my business, since the projects so far do not make any money and only cost me money to keep them hosted. However, it is basically the only work I am doing because I'm being paid enough to live on from his donations.

If it was truly a gift, then you could spend the money on anything you like.
So would the patron be happy and keep sending the money, if you spent it all on holidays or at the bookies and did nothing tangible with it ? 
If the gift is tied to you using it to support your work, which it sounds like it is, it is a grant of some kind. Regardless that they want nothing monetary in return.

It's a fair point. The money is tied to supporting my work, so maybe it is more of a grant. I could use it on holidays but I expect after a while the payments would stop.

_chris_3

[Deleted User] said:

If you went to a tax specialists they would want a full understanding of the facts.  You've not done that here and so it is impossible to say.

There are basically three likely ways it could be taxed:

1. Employment income: If there was an employment income then it would be taxable.

2. Self-employed income: If the money was received in connection with your existing self-employed trade it would be taxable.  This might be because it was part of the profits of your trade or because some anti-avoidance rule treated it as such. There is a lot of old case law which talks about whether money is taxable as trading income with weird and wacky names such as Rolfe, Lincolnshire Sugar, Benyan, Falkirk Ice Rink, Chibbet and so on.  Examples of anti-avoidance legislation might be s28A (money's worth) and s23A (trading income provided through third parties) ITTOIA 2005.  

3. Miscellaneous income: This is a sweep up set of rules that is designed to catch things that look and feel like income but are not otherwise taxed.  For example, it can cover money received under an agreement that is not otherwise taxable.

Without knowing the full facts it's impossible to say what a tax specialist might think and whether HMRC/the courts would agree. 

But from what you have said ("There is a person ... who pays me to work on my own projects ... I've been invoicing the person, putting the income through my books and paying tax on it  ... he offered to support our personal projects financially") it might take some convincing for HMRC to accept that the principles of those cases mean it is not taxable.

What other facts might one need to know?

Regarding the invoicing, that was suggested on my side to keep everything above board. Going forward, if the money could be deemed a gift, I wouldn't have to send them.

To reiterate, the person pays me money because he likes the projects I am working on and would like to see them out in public. The money is mine to do whatever I want with. If I stopped working on the projects he was interested in, I expect it would stop.

I'm going to email my accountant and ask him. To be honest, I would be surprised if it were tax exempt, it would be lovely though.

Jeremy535897

_chris_3 said:

Jeremy535897 said:

If you have no contract with this person to provide anything to him, and he would receive nothing even if you one day made a lot of money for them, you could argue that they are not part of your business, which I assume consists of doing a similar sort of work but for which you do provide a service in return for payment.
Equally, any costs relating to the websites are not an expense of your business, which might affect the amount you can claim in respect of computer equipment, use of home etc.
However, if you are free to sell these websites and, if you did so, they would be treated as part of your taxable income, then it may be that these sums you "invoice" are more in the nature of a grant, and would therefore be taxable. See: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40451

Thanks, I can see the argument to call it a grant but AFAIK grants require a return for the money. My situation does not require anything as such, he is simply supporting us to continue our own work.

I guess you could argue that it's not part of my business, since the projects so far do not make any money and only cost me money to keep them hosted. However, it is basically the only work I am doing because I'm being paid enough to live on from his donations.

If your patron would stop funding you if you stopped doing the work, then I think it is more analogous to a grant.

_chris_3

[Deleted User] said:

_chris_3 said:

What other facts might one need to know?

If you asked me the question, I'd want to have you talk to me about the arrangement and explain all the nuances in quite some detail.  So looking at the really narrow bit around the individual and the quantum, here are ten questions that come to mind to get to grips with the detail:

1. Who is the individual?  
2. What do they do?
3. How do you know them and have you met/spoken to them?
4. Do they pay you (or your colleague) for anything else? For example, do you charge them £10 per month for ...
5. Why do you really think the individual pays you?
6. How much is paid to you and when?
7. Who decided that amount and why?
8. Where is that amount agreed/set out?
9. What might cause the amount to change?
10. Why not £100 more or £100 less? 
and so on ...

Thanks, I'm assuming you don't want me to answer those questions but it's helpful to see.

uknick

Advice on treatment of grant income 

Grant Income – Green Accountancy

Hoenir

_chris_3 said:

Albermarle said:

_chris_3 said:

Jeremy535897 said:

If you have no contract with this person to provide anything to him, and he would receive nothing even if you one day made a lot of money for them, you could argue that they are not part of your business, which I assume consists of doing a similar sort of work but for which you do provide a service in return for payment.
Equally, any costs relating to the websites are not an expense of your business, which might affect the amount you can claim in respect of computer equipment, use of home etc.
However, if you are free to sell these websites and, if you did so, they would be treated as part of your taxable income, then it may be that these sums you "invoice" are more in the nature of a grant, and would therefore be taxable. See: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40451

Thanks, I can see the argument to call it a grant but AFAIK grants require a return for the money. My situation does not require anything as such, he is simply supporting us to continue our own work.

I guess you could argue that it's not part of my business, since the projects so far do not make any money and only cost me money to keep them hosted. However, it is basically the only work I am doing because I'm being paid enough to live on from his donations.

If it was truly a gift, then you could spend the money on anything you like.
So would the patron be happy and keep sending the money, if you spent it all on holidays or at the bookies and did nothing tangible with it ? 
If the gift is tied to you using it to support your work, which it sounds like it is, it is a grant of some kind. Regardless that they want nothing monetary in return.

It's a fair point. The money is tied to supporting my work, so maybe it is more of a grant. I could use it on holidays but I expect after a while the payments would stop.

Gifts are made without reservation. There's a connection to the work you are undertaking, i.e. for your time and effort. 

silvercar

It may be interesting to know how your sponsor is accounting for the payments.

it’s analogous to charity donations (I’m not saying you are a charity). A generous benefactor may sponsor a researcher working on the next cure for a cancer, because the benefactor can see a benefit to society for the work being done. Or sponsor a teacher in a special needs school, because there is a need. In your case the sponsor wants an alternative to Instagram out in world and is happy to fund your costs so that you can concentrate on it.

Sarahspangles

Americans are familiar with the Patreon model for creative work, and in that case the income from patrons is taxable whether in the US or UK.

https://www.theaccountancy.co.uk/tax/the-tax-on-creativity-tax-for-uk-patreon-creators-94675.html