For the record, I love kickstarter. It is a great opportunity for creatives, and non creatives, to fund projects and make new things happen. For the moment I’m going to assume that you know what crowdfunding is, and generally how a platform such as Kickstarter works. So what is Kickstarter?
This question has been playing on my mind recently. As I started to dive deep into the minutiae of setting up a Kickstarter campaign, I have been thinking about audience expectation and what that means to me. Which set off a train of thought about the way a crowd funding platform like Kickstarter actually functions. That is, how does it work in the real world along side things like tax, mortgages, next day delivery and having enough phone battery to order pizza through the app. You know, the important things in life.
When I launch Metro Maps will kickstarters expect to place an order and get the game? or are they expecting to contribute to a project and get a reward of symbolic value? Those two statements are delicately different but Kickstarter themselves are very clear on this subject.
“Backing a project is more than just giving someone money. It’s supporting their dream to create something that they want to see exist in the world.”https://www.kickstarter.com/press?ref=hello [Accessed: Jun 2019]
This means Kickstarter sees backers as people who contribute to projects in order to help people create new things. It’s very simple, and very honourable.
This is where we run into a little problem. Every Kickstarter offers rewards for contributing to the project, It’s exactly what I will be doing with Metro Maps. The problem is, this means that creators start promising goods in exchange for pledges. Which understandably starts looking like a transaction, rather than a gesture of support. In fact HMRC (The UK equivalent of the IRS) sees crowd funding as a new business venture and therefore taxable.
“Where a contributor receives goods or services that have an intrinsic value (e.g. clothing, tickets, dvd) in exchange for support given, there is a supply for VAT purposes. The VAT treatment will follow the liability of the goods or services provided.”https://www.gov.uk/hmrc-internal-manuals/vat-finance-manual/vatfin5550 [Accessed: Jun 2019]
Having looked through the HMRC website (not the most thrilling way to spend time) the only only occasion when you are not liable for tax is if rewards are symbolic in value. For example, you get mentioned in the credits or we will send you a nice hand written letter to say thank you.
So in the context of our original question; What is Kickstarter?
Well I’m starting to think it’s two things. First and foremost It is a way for creatives to ask for funding towards a new project. Or as Kickstarter states, it’s a way of supporting an artists dreams. But Kickstarter is also a lower risk way for creatives to start a business and sell their stuff. Which one of those two categories your project falls into is entirely dependent on the rewards you offer. And I expect this will also influence the attitudes of your backers as well.
With that in mind, I’m off to call my accountant.