Are you breaking the law by running a Crowdfunding campaign and not declaring your income?

Chris Jones talks about some of the tax implications of running a crowdfunding campaign in the UK. Though laws in other countries may differ – almost all tax collecting agencies will see crowdfunding funds as a source of income – as always check with a legal professional who knows your local laws.

So you run a crowdfunding campaign, get some cash in to make your film… only you don’t declare it as income. And three years later HMRC slam you for tax evasion. Slaps on the wrist, interest charges, fines both small and big… and it’s even possible there could be a custodial sentence… Seriously, if they view what you have done as pernicious fraud, and the sums are big enough, they may seek to send you to prison to wake the rest of us to the fat that CROWDFUNDING IS THE SAME AS SELLING AND THEREFORE SEEN AS TAXABLE INCOME BY HMRC.

Let me be clear.

Crowdfunding in the UK, using one of the existing platforms like InideGoGo or Kickstarter is the same as running an internet sales store.

You are selling perks. All sales are taxable income and if your entire turnover is high enough, they are also VAT attracting too.

No you cannot accept it as a donation, only a charity can do this.

No you cannot call it a loan, you have no loan agreements with you ‘contributors’ via Kickstarter / IndieGoGo.

No you cannot call it investment either, you are not offering, and cannot offer (at least via IndieGoGo and Kickstarter) shares or some quasi deal with your contributors.

It’s TAXABLE INCOME. You are SELLING PERKS.

There is no way around this that I know of.

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