In the final part of our Accounting for Bloggers series, Georgi Rollings of Starfish Accounting explains how to deal with payment in kind instead of money in the bank…
Sometimes you could receive payment in kind for writing a blog or in exchange for advertising. Payment in kind is where you receive something other than cash. I don’t mean getting a bank transfer or a credit card payment instead of being given a wodge of bank notes. I mean being given something that isn’t immediately financial in nature. For example:
- A product e.g. a laptop;
- A service e.g. I could do your tax return in exchange for “free” advertising;
How do you treat this for tax purposes?
A product or service
(a) If you are given a product to review, and you use it for personal use, then it would not be taxable;
(b) If you are given an item to review which you intend to sell, then it would be taxable. The value taxed would most likely be the amount you receive on selling the item;
(c) If you are given a product or service instead of payment, then it would be taxable. The value taxed would be the lower of the market rate of the product or service and the usual rate you charge.
(a) If the vouchers are exchangeable for cash then they would be taxable and the value taxed would be the face value of the vouchers;
(b) If the vouchers are not exchangeable for cash (e.g. an M&S gift card or John Lewis vouchers) then they would be taxable and the value taxed would be the lower of the face value of the vouchers, or your normal rate for what you provided in exchange, e.g. your standard advertising rates.
Discounts are complicated! If you are given a discount off a product, and the resulting cost of the product is less than it would be if you bought it second hand, then you would be taxed on the difference.
Just remember… if you receive something other than cash and you have had to do or provide something in return then you need to think about the tax implications!
About Starfish Accounting
Starfish Accounting provides accounting, tax and bookkeeping services to small businesses and works primarily with women in business. Georgi Rollings, the founder of Starfish Accounting, is a qualified Chartered Accountant with more than 15 years experience. Georgi is also proud mum to beautiful twin girls, and juggles business and babies out of her home office in Maidenhead, Berkshire.
Tel: 01628 299 310