Game earnings via business account?

[Gros]

Hi all.

Usually I'm doing IT contracts and accounting via a limited company, as most of you here. Recently things have been bad and I haven't secured contracts, so have been focusing on new things.

I released a free game onto the mobile market, which thankfully has done rather well, and I'm making money via advertising. The money gets paid to me from the Ad company into my Paypal account once a month.

1) Is it acceptable to class this as business earnings? It's the same business that I set up my company for, and it's money I've earned from my own efforts.

My hope is that I can pay this money into my business bank and account for it there, so that I can pay myself dividends from it, and the taxman gets his share via corp tax. The alternative would be declaring it as personal income, and paying tax that way.

2) If the answer is Yes, how do I do this, regarding VAT? I'm VAT registered, but this money has no VAT involved. I don't bill them, they just pay me a flat sum every month.

Any advice greatly appreciated!

[chef]

Aswell as asking on here for general advice, this seems more of a question for your accountant surely?

[zedAccounts]

Is the game a company asset? Did you write the game for the company? Is the Paypal account in the company's name?

ZED.

[Stag Cozier]

Say this game thing wasn't the same business activity as your limited company's, you could simply declare the profit on your personal tax return and pay the associated tax on it as it would be considered other income.

[Gros]

Aswell as asking on here for general advice, this seems more of a question for your accountant surely?

Not had a response, could be away, and I need to act fairly quickly.

Is the game a company asset? Did you write the game for the company? Is the Paypal account in the company's name?

No, no and no. It was a personal venture, which I now wish to turn into a business venture. I can register my account with the ad company as my business name, and the money can go straight from Paypal into the business account.

Say this game thing wasn't the same business activity as your limited company's, you could simply declare the profit on your personal tax return and pay the associated tax on it as it would be considered other income.

Yes but that's what I want to avoid.

[zedAccounts]

In that case maybe treat what you have earned so far as personal income. Then slap your company name on the software, set up a paypal account in your company's name and treat subsequent income as the company's.

ZED.

[Stag Cozier]

Yes but that's what I want to avoid.

If your personal income is incidental to your company income, then its fine to declare it as other income on your personal return if you are a basic rate tax payer. It actually works out cheaper (20% income tax vs 21% CT). As it is incidental, you don't have to tell HMRC you're self employed or start paying class 2 NIC.

As Zed said, you could treat what you have done thus far as personal and anything else moving forward as company?

[Moscow Mule]

I would be inclined to sell the IP of the game to the company.

I'm not sure if this would come under capital gains (hopefully - you can use you tax free allowance) or incidental income.

Then carry on as you suggest with the company continuing to benefit from the advertising income (you will need to re-work everything to be in the company name).

[Gros]

If your personal income is incidental to your company income, then its fine to declare it as other income on your personal return if you are a basic rate tax payer. It actually works out cheaper (20% income tax vs 21% CT).

When you talk about playing 20%, is this on all my earnings from the game, or just 20% over a certain figure?

[Sally BFCA]

If you start putting the income through your company, you will either need to invoice or provide receipts detailing money received and the breakdown of VAT as you are going to have to work out the VAT element of what you receive. You may need to adjust your percentage rate if you are on the VAT flat rate scheme for a different trade classification.

Previous income prior to having a paypal account should be treated as personal income, as that is what is was then.