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Tax Position of Crowdfunding Income

If you receive and spend some of your crowdfunding pledge money before setting up a Limited Company

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If you receive and spend some of your crowdfunding pledge money before setting up a Limited Company to manage the project going forward, is there anyway to overcome the difficulty you subsequently realise you've created and find yourself being taxed on the unspent funding as a sole trader? 

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By lionofludesch
15th Apr 2019 16:45

You definitely need to be spending some of that unspent funding on an accountant.

"Can of worms" springs to mind.

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By andy.partridge
15th Apr 2019 17:35

You’re quite certain, are you, that people pledged money to a company that didn’t exist?

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By SXGuy
16th Apr 2019 09:13

Give it back?

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By Jdopus
16th Apr 2019 09:35

Depending on the nature of the spending you can probably treat it as pre-incorporation expenditure and bring it in via the directors' loan account. This is probably preferable to being taxed as a sole trader. You do need an accountant though.

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Replying to Jdopus:
By Duggimon
16th Apr 2019 09:43

The issue isn't really about pre-incorporation expenditure though, it's about pre-incorporation income, funding and contractual obligations, which are somewhat rarer, and possibly impossible.

Who have the customers agreed to pay for the promised product or service? Not a non-existent company.

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Replying to Duggimon:
By Jdopus
16th Apr 2019 12:22

If it's money received from any of the big crowdfunding sites then generally the money is treated as a freely given gift to the individual seeking the crowd funding and the customers have no legal right to the promised product or service.

I'm presuming that's the situation here as any loan based crowdfunder like funding circle wouldn't loan money to a company which doesn't exist. Perhaps OP can clarify though.

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