We are going to make LOTE4 a collaboratively built event, using the Makerfox software to organize the collaboration (as discussed here for example Community Call Notes 2014-07-24: On LOTE4 tickets - LOTE4 “The Stewardship” - Edgeryders ). We could run into tax implications (taxes to be paid in money on barter value income, which is quite impossible to do). So how to organize the collaborations to route around such issues?
In my understanding so far, barter trade has to be accounted for like any other income, which creates two issues and one non-issue:
- The non-issue: income tax for the company. Edgeryders as a company would spend all turnover from ticket sales on business expenses for realizing LOTE4, by buying corresponing services on Makerfox. So it's income tax neutral.
- Issue: VAT on ticket sales. Edgeryders is registered for VAT now, so we have to include the UK VAT rate into ticket sales, and forward it to the UK government in legal tender currency. VAT would be tax-neutral like income tax if we'd sell all tickets to companies, but we sell them to individuals ...
- Issue: income tax for participants. Participants providing a service to make LOTE4 happen are rewarded with a ticket, and both service and ticket have a price tag. So the service is taxable income, although participants usually have no company registered.
So what do we do to solve this mess? We have a long list of workarounds for tax stuff in Makerfox, but the cases here (trade between businesses and private individuals) are the most difficult. The only idea I have so far is framing it as internal collaboration to build the event. It would be equivalent to a ticket discount or free ticket when volunteering as helping hand at the event, which is done by many festivals, the CCC conference and such. Would financial authorities accept that, and do we need any steps to make sure they do?
Obviously I’m looking for the knowledge of @ArthurD here 
First thoughts…but I will be consulting the accountants…
The non-issue: income tax for the company. “So it’s income tax neutral.”…
er no… companies pay tax on profits (not on income, funny that…) If we make a profit overall then we have to pay tax…but a lot of things have to go into the wash on that …yet to be decided.
Issue: VAT on ticket sales. “Edgeryders is registered for VAT now, so we have to include the UK VAT rate into ticket sales, and forward it to the UK government in legal tender currency. VAT would be tax-neutral like income tax if we’d sell all tickets to companies, but we sell them to individuals …”
so we have to determine an approximation for what the ticket price would be should it be ‘for sale’
Issue: income tax for participants. Participants providing a service to make LOTE4 happen are rewarded with a ticket, and both service and ticket have a price tag. So the service is taxable income, although participants usually have no company registered.
so we have to determine an approximation for what the ticket price would be should it be ‘for sale’
Overall (and before the accountant says anything to override me…) I think there are some issues about whether the tickets have value on a market…we gave given them away for free in the past … we have not had overcrowding or even full capacity any even …so is there marginal value on an open market for this event. the ticket does not include accommodation or travel… it merely grants access
Further, the work required to get the ticket is not work that anyone else would pay to have done or that can be done by anyone outside of the community…
All in all… I need to talk with the accountant… and I shall be on holiday with him in 10 days time !! How convenient…
Not an issue
The tickets have ‘notional value’ only, are not negotiable and cannot be traded …
so there are no tax issues …since they do not count as income…in the same way as your supermarket loyalty points are not income…
That’s good news for LOTE tickets
It also opens the way to a potential new way to care about tax implications of Makerfox barter trades and complementary currencies in general. Haven’t heard of this “technique” anywhere yet, and it sounds promising to investigate it further some time.
Thanks for caring, Arthur, much appreciated!