We applaud you for your altruism, but how does this benefit your firm?
Separate from a 'what will the shareholders think?' vantage point, this is a valuable question depending on your tax jurisdiction. In the UK, such sponsorships will be tax deductible only if you can answer this question in a satisfactory manner (or if the recipient is a registered charity, which is unlikely).
Hence the patio11 post about requesting a custom commercial license from the maintainers; the tax office will happily let you deduct 20k of software licensing but donations look like fraud.
Yep. I don't even need bespoke legal work; I'm happy if people just send an invoice with Commercial License as a line item and agree via email "Our Commercial License is the MIT license in the README and is available for $1,000 per year."
HNers often ask whether this is somehow dodgy, which it is not. Both of the tax agencies which care about my business give me virtually carte blanche to determine which products/services are necessary to keep the business running, subject to their standard regulations, and it is my considered judgment as a business owner that the software I use is necessary and that the amounts I pay are appropriate to the value received.
I've seen patio11 say things like this over the years, but hadn't connected the dots with this particular issue - genius. Certainly something we'll consider doing as a CYA against HMRC (or even our own bookkeeper who is rather strict with us).
In the UK, such sponsorships will be tax deductible only if you can answer this question in a satisfactory manner
As long as you can show the directors aren’t benefiting indirectly from this then I think it’s unlikely to be an issue, especially if you’re using the libraries in question? HMRC don’t require you to prove that you’re running your business to maximise profit, just that you aren’t disguising director payments as expenses.
You're not wrong, but it's also more complex than that. They could choose to apply "commerciality tests" which include things like whether you're paying over the odds or whether other forms of sponsorship would have a better commercial effect. https://www.gov.uk/hmrc-internal-manuals/business-income-man... is HMRC's own guidance to its tax inspectors on some of these points.
For example, if my company fancied donating £1000 a month to the curl project because we think it's a fantastic tool worth supporting (it is!) but we only use it in a handful of scripts, HMRC might give us some grief if it came up in an inspection. I dare say given the expected technical knowledge of the average tax inspector that a typical HN reader could prevail in such a challenge ;-)
Comments
We applaud you for your altruism, but how does this benefit your firm?
Separate from a 'what will the shareholders think?' vantage point, this is a valuable question depending on your tax jurisdiction. In the UK, such sponsorships will be tax deductible only if you can answer this question in a satisfactory manner (or if the recipient is a registered charity, which is unlikely).
Hence the patio11 post about requesting a custom commercial license from the maintainers; the tax office will happily let you deduct 20k of software licensing but donations look like fraud.
Yep. I don't even need bespoke legal work; I'm happy if people just send an invoice with Commercial License as a line item and agree via email "Our Commercial License is the MIT license in the README and is available for $1,000 per year."
HNers often ask whether this is somehow dodgy, which it is not. Both of the tax agencies which care about my business give me virtually carte blanche to determine which products/services are necessary to keep the business running, subject to their standard regulations, and it is my considered judgment as a business owner that the software I use is necessary and that the amounts I pay are appropriate to the value received.
I've seen patio11 say things like this over the years, but hadn't connected the dots with this particular issue - genius. Certainly something we'll consider doing as a CYA against HMRC (or even our own bookkeeper who is rather strict with us).
As long as you can show the directors aren’t benefiting indirectly from this then I think it’s unlikely to be an issue, especially if you’re using the libraries in question? HMRC don’t require you to prove that you’re running your business to maximise profit, just that you aren’t disguising director payments as expenses.
You're not wrong, but it's also more complex than that. They could choose to apply "commerciality tests" which include things like whether you're paying over the odds or whether other forms of sponsorship would have a better commercial effect. https://www.gov.uk/hmrc-internal-manuals/business-income-man... is HMRC's own guidance to its tax inspectors on some of these points.
For example, if my company fancied donating £1000 a month to the curl project because we think it's a fantastic tool worth supporting (it is!) but we only use it in a handful of scripts, HMRC might give us some grief if it came up in an inspection. I dare say given the expected technical knowledge of the average tax inspector that a typical HN reader could prevail in such a challenge ;-)
That’s a very interesting read, thank you!