Sale of an Internet Domain Name

[Stephen Holmes]

Hi there - a few years ago I purchased an internet domain name for email and website purposes (a private purchase, not affiliated with a company, so I paid VAT etc). I've been approached recently by a company who'd like to purchase this domain name from me.

If I sell this on at a profit, am I liable for tax? How would this work? Is it treated as supplementary income (i.e., on a Form 11) or can I just receive cash and smile as I lodge it in a bank?

 

[Brendan Burgess]

It would be a gain for Capital Gains Tax purposes. You would pay 33% tax on any profit which would be the proceeds less the cost of buying it in the first place.

When you say you have been approached to sell it, I presume you know that most of these approaches are from scammers? Unless you have a name which is genuinely valuable, then it's likely to be a scam.

Brendan

 

[T McGibney]

It would be a gain for Capital Gains Tax purposes. You would pay 33% tax on any profit which would be the proceeds less the cost of buying it in the first place.

It may be a trading gain depending on the context and the frequency of such transactions. Not enough info supplied here.

When you say you have been approached to sell it, I presume you know that most of these approaches are from scammers? Unless you have a name which is genuinely valuable, then it's likely to be a scam.

+1

 

[Stephen Holmes]

Thanks guys. Yep, fully aware of the scamming situation. As it happens, it's a Legal Practice here in Ireland and I've verified the contacts and all the usual "Nigerian Prince" angles.

Appreciate the responses!

 

[cremeegg]

It would be a gain for Capital Gains Tax purposes. You would pay 33% tax on any profit which would be the proceeds less the cost of buying it in the first place.

There is a €1,270 exemption, if you are married you can transfer half the ownership to your spouse before the sale and get the exemption x2.

 

[T McGibney]

There is a €1,270 exemption, if you are married you can transfer half the ownership to your spouse before the sale and get the exemption x2.

Won't work if challenged by Revenue. Artificial tax avoidance.

 

[dublin67]

Won't work if challenged by Revenue. Artificial tax avoidance.

There is no CGT anti-avoidance on this topic. The Revenue would need to use the general anti-avoidance provision (s 811D or thereabouts) and this amount of tax lost wouldn't even raise a blip on the radar.

The CGT rules enable you to transfer to your spouse free of CGT and if you both own the asset then you can get the CGT exemption. However I would point out that the amount is rather small - €1,270 X 33 = €419. Is is worth going to the bother of transferring 50% of the domain ownership to your spouse to save €420 - you would need to show transfer of beneficial ownership. My view is that the frustration of dealing with your domain providers would outweigh any benefit.

 

[T McGibney]

There is no CGT anti-avoidance on this topic. The Revenue would need to use the general anti-avoidance provision (s 811D or thereabouts) and this amount of tax lost wouldn't even raise a blip on the radar.

The CGT rules enable you to transfer to your spouse free of CGT and if you both own the asset then you can get the CGT exemption. However I would point out that the amount is rather small - €1,270 X 33 = €419. Is is worth going to the bother of transferring 50% of the domain ownership to your spouse to save €420 - you would need to show transfer of beneficial ownership. My view is that the frustration of dealing with your domain providers would outweigh any benefit.

Appreciate your points on the practicalities but my point stands too.

It makes no commercial sense to transfer a 50% share of an asset to a spouse while a sale of that asset is imminent. On that basis, the transfer is liable to be disqualified as general anti-avoidance on the grounds that it wouldn't make sense in the absence of a tax benefit.

Your point regarding radar and blips would melt like snow in the course of a Revenue aspect query or audit of the OP's relevant tax return.

 

[dublin67]

You should be aware of when the general anti-avoidance legislation is used and it is never used on small amounts of money like this. To consider that the Revenue would invoke a complicated piece of legislation like 811D on such a small amount of money is far fetched and farcical. I doubt that something like this would even cross the desk of a PO in the relevant district.

I have no further comment.

 

[T McGibney]

You should be aware of when the general anti-avoidance legislation is used and it is never used on small amounts of money like this. To consider that the Revenue would invoke a complicated piece of legislation like 811D on such a small amount of money is far fetched and farcical. I doubt that something like this would even cross the desk of a PO in the relevant district.

I'm talking about aspect query exercises and audits. Revenue Annual Report 2017, Page 7: "In 2017, we carried out a total of 655,557 compliance interventions, ranging from routine assurance checks to audits and investigations."

So the OP's tax return has arguably a 1-in-3 to 1-in-10 chance of being reviewed, depending on how you count it. If you're happy for the OP to play the percentages, do say so. But don't try to fool him that there's no risk in doing so.

I have no further comment.

Quite.

 

[torblednam]

You should be aware of when the general anti-avoidance legislation is used and it is never used on small amounts of money like this. To consider that the Revenue would invoke a complicated piece of legislation like 811D on such a small amount of money is far fetched and farcical. I doubt that something like this would even cross the desk of a PO in the relevant district.

I have no further comment.

I'm talking about aspect query exercises and audits. Revenue Annual Report 2017, Page 7: "In 2017, we carried out a total of 655,557 compliance interventions, ranging from routine assurance checks to audits and investigations."

So the OP's tax return has arguably a 1-in-3 to 1-in-10 chance of being reviewed, depending on how you count it. If you're happy for the OP to play the percentages, do say so. But don't try to fool him that there's no risk in doing so.

Unless you think all 657,557 of those interventions crossed a PO's desk then I think you're just digging a deeper hole for yourself. Section 811 is an exceptional power, which can only be exercised by officers nominated by the Revenue Board. Jane Bloggs doing her aspect query on a small CGT disposal will not be a nominated officer (nor indeed will her district manager, whose desk, as D67 rightly points out, the matter would have to cross).

If an individual was to get into a dispute with staff in an ordinary compliance district over a small amount like a few hundred quid, it is infinitely more likely to be over their failure to capitalise a few bits and pieces in their rental property, than the application of S811 to an inter spouse transfer...

 

[T McGibney]

Section 811 is an exceptional power, which can only be exercised by officers nominated by the Revenue Board. Jane Bloggs doing her aspect query on a small CGT disposal will not be a nominated officer (nor indeed will her district manager, whose desk, as D67 rightly points out, the matter would have to cross).

Really? That's not exactly how I've seen it pan out in practice. You don't have to formally invoke S811 to include it as a bargaining chip in an audit settlement negotiation.

If an individual was to get into a dispute with staff in an ordinary compliance district over a small amount like a few hundred quid, it is infinitely more likely to be over their failure to capitalise a few bits and pieces in their rental property, than the application of S811 to an inter spouse transfer...

What has this to do with anything?

 

[torblednam]

Really? That's not exactly how I've seen it pan out in practice. You don't have to formally invoke S811 to include it as a bargaining chip in an audit settlement negotiation.

Really (back at you) - You've seen S811 threatened over a few hundred euro of potential liability?

From my own experience, it sounds far fetched and farcical, exactly as D67 says. If an audit negotiation comes down to the inspector bandying section 811 about in relation to a few hundred quid, everybody involved deserves a clip about the ear IMHO.

 

[T McGibney]

Really (back at you) - You've seen S811 threatened over a few hundred euro of potential liability?

From my own experience, it sounds far fetched and farcical, exactly as D67 says. If an audit negotiation comes down to the inspector bandying section 811 about in relation to a few hundred quid, everybody involved deserves a clip about the ear IMHO.

I've learned through experience that nothing is ever far-fetched and farcical when it comes to the actual and attempted browbeating of taxpayers during Revenue audit interviews.

I personally have had occasion on a number of occasions to demand adjournment of interviews when literally the kitchen sink was thrown at taxpayers including all sorts of lurid and far-fetched accusations and suggestions were made.

And the stories I have encountered from cases where the taxpayer foolishly forewent the option of professional representation are worse, much worse.