Capital allowances on websites
16th October 2017
Posted in Articles, Business Tax, Corporation Tax, Featured Articles by Tom Minnikin
The issue
Website costs can be significant and are often capitalised in a company’s accounts. Traditionally HMRC has viewed such capital costs as non-tax deductible, on the basis that they are akin to a ‘business window’ and as such they do not qualify for capital allowances (because a window does not have a business function).
HMRC has now revised its view and generally now accepts that capital allowances can be claimed in respect of capitalised website costs. This is because most websites offer key functions to the business, such as providing customers with the ability to order goods or services or glean detailed information about products.
Website costs and annual investment allowance
In some cases this will mean that full tax relief can be claimed in respect of website costs for a particular year. This is because they should fall within the annual investment allowance regime, which allows full tax relief on annual costs of up to £200,000 incurred during the year.
Make claims!
It is worth identifying any website costs which were previously not claimed as qualifying capital allowances expenditure (perhaps based on HMRC’s old view) because if the website is still owned and used then it should be possible to add the costs to a company’s capital allowances pool irrespective of how long ago the costs were incurred. Annual investment allowances will not however usually be available for old years because these are only available in respect of the year that expenditure is incurred – and that year will often be out of time.
