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Crowdfunding income - Tax treatment

Client has received Crowdfunding income, how is this treated for tax purposes

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Company client has received Crowdfunding income of around £15,000 to assist with the business start up.  The company is not a charity.

The sums received have been gifts, none of the donors have been given equity and none of the sums are loans.

Some of the donors have received small gifts.  These have been of the type of products that the client is selling so could in effect be marketing/advertising costs I assume?

The question is how should the Crowdfunding income be reported in the Company's accounts?  Is this simply taxable income?

Does it depend on what the money has specifically been spent on?  E.g. if some was identifiably used to purchase capital assets, does the Crowdfunding income reduce the capital cost of the asset instead?

There is a lot of info out there, none of it categorical, hence this question.  If anyone can help it would be hugely appreciated.

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By chicken farmer
06th Nov 2019 14:45

Why do you think this is income?

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chips_at_mattersey
By Les Howard
06th Nov 2019 15:59

Don't ignore the VAT issue. Although the reported income is less than the registration threshold, if it is consideration for a supply then the company could voluntarily register for VAT to recover input tax on start-up costs.
Do consider direct and indirect taxes and plan ahead. I would suggest a meeting with your Accountant to definitively decide these issues.

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By Carl London
06th Nov 2019 20:24

If some provides a pledge and they get a product in return, for approximately the market value, I see that as being a normal sale (perhaps via deferred income if goods not sent straight away). Is the 'gift' the product they are manufacturing/selling?

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By Red Leader
06th Nov 2019 20:31

I sympathise with your quandary. It's such an opaque area that I turn away crowdfunder prospects. Too much time spent working out how to do basic double entry for the entity.

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By Tax Dragon
07th Nov 2019 17:44

stephenpotter wrote:

>The question is how should the Crowdfunding income be reported in the Company's accounts?  Is this simply taxable income?

Yes.

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