[ˈkraʊdfʌndɪŋ]
Crowdfunding allows individuals or companies to obtain funding from lots of different people with a variety of ways to rewards the funders.
Crowdfunding is a method of financing by raising small amounts of money from a large number of people. It can be done through Crowdfunding platforms, where individuals or organisations can share information about their project and ask for financial support.
There are four main types of Crowdfunding:
Reward-based Crowdfunding gives funders a non-monetary benefit for contributing, such as early access. In the UK, there are no tax reliefs for this kinds of Crowdfunding.
Equity-based Crowdfunding gives supporters equity in exchange for their investment. Investors will be responsible for Income Tax on any dividends they receive and Capital Gains Tax if they sell the shares for a profit in the future.
Donation-based Crowdfunding is like making a Charitable Donation. If the funder is giving the money to a charity, Gift Aid can be claimed.
Debt-based Crowdfunding also known as a Peer-to-peer Loan is taking out lots of different loans from lots of people. You will probably pay tax on earnings from this. If you cannot afford to pay the loans back, you might be able to claim Social Investment Tax Relief (SITR)
The Enterprise Incentive Scheme and the Seed Enterprise Incentive Scheme (SEIS) exist to offer tax reliefs for people investing in startups.
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