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Sam
Sam, Accountant
Category: UK Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Hello. Some Background: I created and built a website

Resolved Question:

Hello.

Some Background:

I created and built a website at the end of November 2010. I had some people that helped me with it and I payed them some cash (and got invoice). I ran the website from my own apartment. The aim was not to sell the website!

I received some strong interest the following year from other businesses/people because the website because successful and in August 2011 I sold it for over 20k pounds. A part of the money was for the domain name(and goodwill) and a part for the Website Content.

Also after I sold it I wanted to have another website so I continued to pay a person to help me until the end of the financial year but it was not successful so I didn't go forward anymore.

I registered as a self employed this year because I realised I have to declare that sale and currently still need to submit the self assessment form for 2011-2012 (when the website sold)

Question :

- The domain name and the website content go both in the capital gain or domain name (capital gain) and Website content (personal income)?
- Where are the expenses for building the website (advertising, people that helped me) subtracted from (capital gain or personal income or from both proportional) ? Also what about the expenses after the website has been sold until the end of the financial year 2011-2012 -- should I declare them as what?

Thank you.
Submitted: 11 months ago.
Category: UK Tax
Expert:  Sam replied 11 months ago.

Hi

 

This is a capital gain - so you have the sale price less then costs to build (which would include the cash you paid out for the help) and you can deduct any legal fees in selling the website.

 

Then the first £10,600 is free, as this is your capital gain exemption allowance and the remainder will be liable to capital gains tax.

 

This is not entered as personal income at all.

 

However do you plan to continue with this again - as the second build was a loss. And might I ask whether you made any money from the first build during the period it was built and sold?

 

 

 

 

Thanks

Sam

Customer: replied 11 months ago.

Hi,


 


Thanks for the info. I currently stopped with the development of websites and I don't have any other future plans. The cost to build also includes things such as travel costs, a part of my accomodation, laptop ?--> (all these were necesarry to develop the website)


 


To answer your question..I have made a few hundred pounds from ads that were on the website from the first build until it was sold..that's it. Where goes this revenue?


 


Isn't there an issue because the expenses for the website were in the previous financial year and I sold the website in another financial year?


 


Also where should I put the loss for the second build(website) that didn't go so well?


 


Thank you!


 

Expert:  Sam replied 11 months ago.

Hi

 

No, you cannot claim those expenses (part of accommodation, laptop, travel costs) unless the income is deemed to be a trade, which it wasn't, and HMRC will not treat it as such, so this will have to be absorbed by you.

So it makes no difference whether the expenses were incurred the same or a different year.

 

The second one I am afraid you cannot claim anything for, as it did not result in a sale, and had it done so, also would have been treated as a capital gain.

 

Just a note, you should not have registered as self employed, as you do not advise that you traded or made money from this website, so you had no self employed income, so let HMRC know, this was registered for in error and there is just the gain to consider.

 

If you did in fact earn money from the first web build (other than its sale) then let me know as the expenses may well be allowable, and I can advise how to take this forward as then it would be right that you registered as self employed.

 

 

 

Thanks

 

Sam

Customer: replied 11 months ago.

Hello,


 


From the time I built the website and the time I sold it, I received some income from Google Ads that were on my website and the amount received was based on how many people click those ads - which generated around 1000 pounds -> spread over a few months. No other income other than the sale was received.


 


So any money I put in building the site (other than paying someone to help me) can't be put as expenses... even though they were quite a bit?


 


Based on the information above, was I right or wrong to register as a self employed? And if I should not be self employed, how do I declare all this and how much do I need to pay?


 


Thank you.


 

Expert:  Sam replied 11 months ago.

Hi

 

 

Then that changes matters and yes you were right to register as self employed.

So for the tax year you just were trading earning money, then you declare the income you earned from Google Adwords

From this amount (for the tax year 2011/2012) you then claim the actual expenses incurred, so the travel, the laptop - and you can claim £3 a week for each week you traded to 05/04/2012. This income and the expenses will be declared under the self employed (personal income part of the return) and as you did trade then claim the money you paid for the help in building the website.

Then for 2012/2013 you have income earned from google adwords and all the expenses for this and the second build website, so part accommodation £3 for every week you traded, and also travel expenses. And you also should claim the help you received to build the second website as well.

 

Then you also have to declare the capital gain, which will be the £20K less any legal fees to sell ( which also will go on the 2012/2013 tax return, as this the tax year the site was sold.

 

If you wish me to undertake tax calculations for you then please note that as this is additional work then please do consider a bonus for the additional work.

Please then also advise

1) How much money you made from selling adwords and break this up from the date you started to trade to 05/04/2012, and then the period 06/04/2012 to the date you ceased trading

2) Also split how much you spent on expenses - so travel for each tax year - how much the laptop cost, and how much your internet connection was (and the % split between business and private use)

4) Whether you had any other income for each tax year.

 

Thanks


Sam

 

Thanks

 

Sam

 

Customer: replied 11 months ago.

Hello Sam,


 


I am ok with calculating that part for myself :). Thanks for the information.


 


One final part, if the difference between my expenses and personal income is negative for tax year 2012/2013, but capital gain is positive, is it possible to subtract the negative personal income from the capital gain?


 


 


 

Expert:  Sam replied 11 months ago.

Hi

 

Sadly not - the capital gain can only be carried forward to offset against future gains, (or offset by a capital loss) where as the self employment loss can be offset either against other earned income, such as employment, or carried forward to offset against other earned income.

 

So unless you had employment on which tax was paid, then you are best carrying it forward and you should indicate this on the self assessment tax return.

 

Please note it would be appreciated if you could rate the level of service I have provided.

 

Thanks

 

Sam

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12832
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and other UK Tax Specialists are ready to help you
Customer: replied 11 months ago.

I send a bonus :) Thanks for the info.


 


One more thing that's on my mind. In the sale contract, it is specified the following : "Purchase of 20k consists of : 10k domain name (and goodwill) and 10k Website Content."


 


Domain name means something like : www.example.com.


 


Isn't it possible to put the 10K Website Content as income and not capital gain because the content was created by me and people that I paid? The Website Content consists of articles and answers to questions that people put on the website and this had to be done on regular basis. It also contains software that was running on the website and this brought value to the domain name. This also generated a number of expenses.


 


Thanks again.

Expert:  Sam replied 11 months ago.

Hi

 

No I am afraid not - as it all falls within the remit of a capital gain transaction as it was the selling of the asset itself.

 

Thanks


Sam

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