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Where Taxpayers and Advisers Meet

Website R&D, income and tax relief

jugglingcats
Posts:7
Joined:Wed Apr 07, 2021 10:41 pm
Website R&D, income and tax relief

Postby jugglingcats » Wed Apr 07, 2021 10:54 pm

I fear my question spans a few different topics...

I've developed a website in my spare time (a game) that has become quite popular and is generating a small income (hundreds rather than thousands per year).

I have a full time day job and normally pay income tax at source through PAYE and haven't had to file a tax return in recent years. I'm a higher rate tax payer.

I also have a small income (a few thousand a year) from other ad-hoc part time work.

My question is how I can offset my non-PAYE income against the R&D time (effort) and expenses of running the website. The income from the website just covers the running costs, so in my head I shouldn't have to pay tax on this income. I am less clear whether I can offset my ad-hoc part time work against the website given the work is entirely unrelated to the site. A related question is whether I could, in principle, offset some of my PAYE income against R&D / expenses of the website.

There is currently no limited company or anything set up for the website.

Many thanks for your help.

jugglingcats
Posts:7
Joined:Wed Apr 07, 2021 10:41 pm

Re: Website R&D, income and tax relief

Postby jugglingcats » Sat Apr 17, 2021 5:03 pm

No takers? Thanks

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: Website R&D, income and tax relief

Postby someone » Sun Apr 18, 2021 7:14 am

I suspect that a proper answer needs a lot more information.

https://www.ukbusinessforums.co.uk/threads/sole-trader-multiple-busineses-can-the-loss-of-one-be-offset-to-the-other-how.402414/

Looks like losses in the current year can be offset against profits in the same year but carried forwards losses have to be offset against the same business.

Employment income cannot usually (ever?) offset sole trader losses.

You don't say what the other jobs are, but if they're technology related I'd consider whether there's one business or two. (It's questions like this, that require detailed knowledge about what you are doing, that is probably why the experts here aren't replying)

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: Website R&D, income and tax relief

Postby someone » Sun Apr 18, 2021 7:22 am

I've reread that link and found this

https://smallbusiness.co.uk/offsetting-losses-against-paye-1274636/

so looks like you can offset against employment income. Don't know why I was so sure you couldn't.

iwmtaxadvisor
Posts:45
Joined:Wed Sep 09, 2020 5:12 pm
Contact:

Re: Website R&D, income and tax relief

Postby iwmtaxadvisor » Sun Apr 18, 2021 7:27 am

Since you don't put in a Tax Return at the moment, I assume your ad-hoc part time work is paid via PAYE. [ In these circumstances in my experience it is always worth making a tax computation each year to cross check against HMRC's calculation. HMRC do not guarantee to get the computation 'right' by reason of missing key information. Their quality standard reports usually indicate an 80=90% 'right' statistic ]

I also assume there's no question that the web site development is intended to make profits and is not a hobby.

The question mentions R&D credit which is a very useful claim for companies undertaking these activities. Since you're not a company no R&D credit is available. You may feel this is a planning point to consider for next year.

Losses on the web site development can be set off against PAYE income and a tax reclaim made via a Return. Losses may only be offset in this way in the year in which they are first claimed. Any losses you do not use can be carried forward. There is some provision to carry back which is not relevant in your case.

You can claim pre-start up costs (see https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46351 ) which have the effect of increasing the loss you can set off sideways.

There is usually some choice of how you set off the losses - i.e. against which income/gains - which in your case is not relevant.

I assume you have cash flow management software already in place and so can pull off the relevant expenditure items quickly. On other questions I have suggested a list of the expenditures that would qualify. In your case, clearly, a gaming computer would be allowable as well.

The cost of professional assistance need not be high. One is perhaps considering £250. Some wealth managers include a complimentary tax return in their service 'bundle', typically if assets under management are over 250k.
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