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Website development costs

Source: HM Revenue & Customs | | 15/04/2021

One of the main areas to consider in deciding how to treat a deductible expense is whether the cost is revenue or capital in nature. There is no single, simple test that can be applied to decide which items are capital expenditure and which are revenue. This can only be determined by reference to the relevant facts that applied at the time the expenditure was incurred. Capital expenditure cannot be deducted in computing profits, however there are separate reliefs for some capital expenditure.

How would this capital/revenue split apply to the costs of setting up a website?

HMRC's internal guidance says that the costs of bringing an asset into existence or that has an enduring benefit to the trade are capital. Therefore, the regular update costs of the site are likely to be revenue expenses and the original cost of creation, capital.

HMRC’s manuals go on to state an interesting view that, 'the cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue'.

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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