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Is crowdfunding support a valid business expense?

My business uses software and its creator is running a crowdfunding project. Can we support it?

My business uses certain software every day and its creator is soliciting money to help support its continued development. We'd like to back the project so it will continue to be developed. There are some small "rewards" (ie pens, stickers) in exchange for backing the project but these aren't important.

Is this a valid business expense? If so, which account should be used (eg "general expense" or "software")?

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21st Sep 2017 10:11

Sounds as though there's a genuine business purpose for the expenditure.

I'd cheerfully claim that and categorise it as software.

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21st Sep 2017 10:44

I don't believe there's anything specific in legislation or manuals that deals with this circumstance so it falls to the wholly and exclusively test.

I wouldn't see any reason to exclude it on those grounds, there's no other purpose for the payment than the furtherance of business objectives, albeit in a more circuitous route.

Presumably of course there's no connection other than the supplier/customer relationship between the companies?

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By LGW787
to Duggimon
21st Sep 2017 14:01

The software itself is free (open source software) so I don't think we're really "customers" (patrons?). It's becoming increasingly popular for authors of this kind of software to collect money to work on the project full time for a period so new features can be added or a similar arrangement. I frequently see company names listed on the thank you pages but I just wanted to check how to do this, if the expense can be deducted so that it reduces profits, and what to classify it as.

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to LGW787
21st Sep 2017 17:35

LGW787 wrote:

The software itself is free (open source software) so I don't think we're really "customers" (patrons?). It's becoming increasingly popular for authors of this kind of software to collect money to work on the project full time for a period so new features can be added or a similar arrangement.

Doubt anyone will ever be too bothered assuming the amounts are not huge but it could be categorised as a donation. The client is not guaranteed anything by making the payment and the development is presumably available for free to anyone in any event.

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28th Sep 2017 11:05

The fact that the software is open source is irrelevant.

If its software that the business uses to trade and wholly and exclusively blah blah then its a legitimate business purchase at zero cost.

Then if the business needs it going forward, preferably upgraded etc. etc. then that does not change the use.

Spending money on the upgrade is therefore a proper genuine expense. How you pay for it is again irrelevant (in this case the price is subscribing to crowd funding exercise).

We all upgrade or software every year and pay another subscription.

I would also not classify it as capital expenditure because there is no ownership.

But no doubt the pedantic will write volumes arguing its not a business expense or its capital or its whatever. KISS principle applied.

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