Tax treatment of crowdfunding

KEY POINTS

• Crowdfunding has become an established way of raising funds.
• Donations are likely to be subject to tax.
• Special rules for peer-to-peer lending made through authorised investment platforms.
• Importance of the intention of the parties.
• Relief available for irrecoverable loans.

Crowdfunding has become an established term in financial circles. From modest beginnings there is now a multitude of websites offering entrepreneurs a platform to promote their ventures to potential investors.

But while entrepreneurs and investors have shown themselves to be innovative in the way they approach finance in the 21st century tax law tends to move more slowly. UK tax law has its foundations in some fairly ancient principles and has not withstood the challenges of digital business and the global economy. So how does it cope with crowdfunding?...