Applicable tax on domain name sale

montaigne

Hi,

A domain name broker made an offer ( in the $15,000 - $20,000 range) on a domain name which relates to a web application that I have been building over the years as a side personal project.

I am currently a full-time employee in a company, but I also have a sole-trader activity on the side (although very limited this days).

I was wondering what the implications were in terms of tax.

Would it make more sense to sell it through my sole trader company, and get the funds transferred to the related business bank account?

Or should just sell it as a private individual?

How could I estimate the taxation on the sale of that domain name?

Thanks for any advice or information you might have!

Lockedout2

Is your business web development.

If so the sale is a trading receipt subject to income tax.

You might consider it a capital receipt subject to Capital Gains Tax of you have some capital losses.

montaigne

Thanks for the reply Lockedout2.
Yes, my sole trader business is in web development.

Marcusm

Lockedout2 wrote: »

Is your business web development.

If so the sale is a trading receipt subject to income tax.

You might consider it a capital receipt subject to Capital Gains Tax of you have some capital losses.

Strangely enough the determination of whether or not it is income or capital is determined on the nature of the receipt and not whether the taxpayer has losses of one nature or another.

OP: if your sole trader activity is substantially ceased as a result of the sale, it might be possible to characterise it as a capital item. If however the nature of your activity is such that you regularly generate IP and sell it then it would more properly be regarded as income. There is no such thing as a "sole trader company". If your non employment activity has always been through a company then it is likely that the IP exists there already. To whom is the domain name registered (sole name or company) and who bore the costs of registration? These are likely to be the most significant factors in determining who owns the IP.

montaigne

Thanks Marcusm.

OP: if your sole trader activity is substantially ceased as a result of the sale, it might be possible to characterise it as a capital item.

Well, my sole trader activity wont be impacted as such by the actual sale, and is actually almost non-existent since I got my full-time employment (maybe around €1k for last year).

If however the nature of your activity is such that you regularly generate IP and sell it then it would more properly be regarded as income.

My sole trader activity would have been essentially focused on web design/development services.

There is no such thing as a "sole trader company".

Sorry, I meant sole trader business.

To whom is the domain name registered (sole name or company) and who bore the costs of registration?.

The domain name itself is registered under my name and would have been paid using the bank account related to my sole trader business.

Marcusm

montaigne wrote: »

Thanks Marcusm.



Well, my sole trader activity wont be impacted as such by the actual sale, and is actually almost non-existent since I got my full-time employment (maybe around €1k for last year).



My sole trader activity would have been essentially focused on web design/development services.



Sorry, I meant sole trader business.



The domain name itself is registered under my name and would have been paid using the bank account related to my sole trader business.

Based on those facts, I would not see it as attracting any different treatment for VAT or income tax purposes than the other receipts of your sole trader activity.

montaigne

Income Tax it is then.
Thanks for the help Marcusm!

CIARAN_BOYLE

montaigne wrote: »

Income Tax it is then.
Thanks for the help Marcusm!

double check with your accountant or a tax consultant.

If you have never sold a domain name before as part of your trade i would assume it is relevant to cgt.