It is possible to claim for the costs of computer software, consumables and website costs subject to HMRC guidelines.
These costs include:
- Software for annual licences for permission to use certain software (these can usually be expensed against profit).
- Software purchased outright to improve computer services – if a lump sum is made, you should consider whether the software will have enduring benefit to the business – if more than two years, then the software should be classed as an asset.
- Consumables which are generally small in nature and are regularly replaced/consumed can be expensed against profit.
- Website costs- generally design and content development costs should normally be treated as capital expenditure to the extent that an enduring asset is created.
Where a website directly generates sales, subscriptions, advertising or other income this will normally be considered to be an enduring asset. It is, however, also necessary to confirm that the website will have the lifetime normally expected of a capital asset (as noted above, anything under two years is likely to be accepted as revenue expenditure). HMRC’s position is that the following should normally be treated as capital expenditure:
- Application and infrastructure costs.
- Domain names.
- Hardware.
- Operating software that relates to the functionality of a website.
However, not all website related costs will be capital in nature. In particular, HMRC will normally accept that the following are revenue costs:
- Initial research and planning costs prior to deciding to proceed with development.
- Costs associated with maintaining or updating a website (for these purposes the website can be thought of as similar to a shop window – the cost of constructing the window is capital, but the costs of changing the display from time to time is revenue).