I have never come across this one before.
One of my Self Assessment clients got sucked into the now defunct Banners Internet Marketing ponzi scheme.
Paid a fee but did not see a return as the scheme shut down.
Is it possible to claim tax relief on this?
Replies (10)
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What kind of relief?
I'm not familiar with that scheme, what kind of relief could you claim?
A subscription to what? Is the client a sole trader of some kind?
If it is an unincorporated business
Then expenditure is deductible according to its purpose (as present in the mind of the taxpayer when incurring the expense), rather than any effect.
Description
Your description of it as an investment leads me to think it might qualify as a capital loss only. Is there any paperwork?
Stretching the boundaries, could it qualify as an advertising expense? It doesn't sound like he paid for his business to be advertised so probably not. How much are we talking about?
Paperwork
If he has something to back it up, describing the investment then I'd claim a capital loss. Otherwise it looks like a tax nothing.
Tell him not to be so daft next time.
I had assumed that
The client had entered into the scheme as a means of advertising his business. It sounds like that is wrong.
There cannot be a capital loss unless there was an asset acquired. It sounds as though that is not the case.
Banners Broker
This was big organisation for which I also fell into the trap!
I was under the impression I was buying advertising space and effectively reselling at a profit. It was not an 'investment' as such (a totally different debate).
My intention when getting into it was to put it through a limited company; however I soon realised it was a scam. As I made no earnings from and merely paid in around £750 I did not declare this in my accounts and wrote the payment off to directors loan.
trading?
Isn't this in the nature of trading? Sounds like buying wholesale and selling retail.