Reselling domains classed as inventory?

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Hello

I see many questions about domain names but I cannot find any for this specific one so please bare with me. I registered a lot of domain names in the last 25 years or so and continue to register domains to this day. Many of them are 2 or 3 character .com domains (high value) which I have been selling off over the years to the highest bidder. I still try to find cool or unique names that may be of interest to others in the future. All for the purpose of reselling. I also buy websites or domain names sold by others, improve it and then resell it. Domain names that have a good reputation or have lots of reputable backlinks have a higher value than the just the domain registration/renewal price. 

I understand that a domain name is not owned and is rented but for my use case, is it classed as inventory?

The most difficult part of this is that there is so much misinformation or confusion amongst accountants. Some say it is and others say it isn't so I was hoping this community could weigh in on it and provide some insight which I'd really appreciate.

Replies (8)

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RLI
By lionofludesch
22nd Oct 2018 14:15

If you're buying them to resell, yeah, I suppose they're no different to any other trading stock.

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By alan.rolfe
22nd Oct 2018 14:38

You might need to consider the intangibles regime (Sch 29 FA 2002) and HMRC guidance on websites at https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-....

Where that doesn't fit then I would agree that the domain licences feel like trading stock items.

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By Duggimon
22nd Oct 2018 15:05

Domain names are necessarily intangible. I can't think of any other type of intangible asset treated as trading stock, but I still agree with the other responses, that it seems like they ought to be.

I suppose it's this odd quality of them that results in the swathes of contradictory information out there. I would be interested if anyone can provide an authoritative source confirming (or indeed refuting) this.

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Replying to Duggimon:
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By WhichTyler
22nd Oct 2018 15:27

Duggimon wrote:

Domain names are necessarily intangible. I can't think of any other type of intangible asset treated as trading stock,

Does it matter that (the costs are not for ownership (in perpetuity) but rental (for a period)? Is it more like paying a licence fee to use a brand, that you would consider as a revenue expense over the period?

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Replying to WhichTyler:
By Duggimon
22nd Oct 2018 15:41

I think, in your analogy, the licence fee to use a brand is revenue expenditure but is the same true if it's a premium paid to secure exclusive licencing (which I think is more like what happens with domain names)?

I'm posing the question but I don't really know, I would think that would again fall into the intangible assets category but maybe this is something on which there's more concrete and tested examples.

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By ireallyshouldknowthisbut
22nd Oct 2018 17:59

Its trading stock if purchased with the intention of resale.

If purchased for a different purpose, eg to generate income revenue, then its not stock, but part of your business assets.

Any income you receive that is incidental (eg parking income which I think is pretty much dead now) is 'other income' in this context.

I think the issue you may have is many accountants don't understand what a domain name really is and get a big spooked.

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RLI
By lionofludesch
22nd Oct 2018 18:20

On reflection, I think they're more akin to hiring out assets.

The trader is buying or creating domain names with a view to getting a regular income from them, rather than selling them outright.

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By SXGuy
23rd Oct 2018 19:38

How's it an asset if their not owned? Domain names are leased. The ownership details are no different to a cars logbook. It's like a registered keeper.

When you sell a domain name you transfer the ownership details, and sometimes pay a fee for doing so.

Again it's no different to selling a car.

Therefore personally I'd treat it as stock bought for resell, I'd argue ownership is irrelevant for points noted above.

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