Tax Treatments
for Website Development Costs

With shops and offices closed, and the uncertainty of the future, businesses have been forced to adapt to the new digital way of life. It is not much harder to communicate with your prospects and customers. Many businesses are therefore considering how they can adapt and improve their digital communication to keep trading, stay in touch, and of course keep their companies top of mind.

In this article, we take a quick look at the benefits of utilising digital marketing to strengthen your business and the tax treatments for your website development costs.

Strengthening your business

Digital marketing is now more important than ever as many people are working in isolation and relying on digital communications to reach their customers and prospects.

People are hungry for information and spending far more time on their laptops, phones and tablets consuming online content. If you want to make an impact to your reach using digital marketing, now is the time.

Even if you are not thinking about investing your marketing budget on advertising, there are many options that you can explore and apply to maximise your business visibility and your marketing strategy.

Website content

Review your website content and ensure people know you are still trading. Make sure it is clear people understand how you are adapting to current challenges and also how you are making it safe to do so. These include updates to available services, deliveries and returns policies.

Content marketing

Start taking advantage of your website and generate new content for your blog which can be reused on social media and make your digital presence stand out with useful content that gives value and solves problems.

Search

As even more people are searching online for answers, you should check your website for technical errors that once fixed will have an immediate impact on your website’s performance on search engines.

Check your ranking and improve the keyword strategy of your website to improve the quantity and quality of your website traffic.

Tax treatment for website development costs

The tax treatment of the various expenses incurred is often a source of confusion. Not all these expenses are tax deductible in the same way, and it is beyond the scope of this article to go through those in detail.

That said, most websites offer customers a means of ordering goods, services and communicating with the business to find out detailed information about products. These are clearly functions.

On that basis HMRC says that certain website costs qualify for capital allowances as plant or machinery. The types of expenditure falling into this category include that for domain names, hardware, and operating software that relates to the functionality of the website.

Capital allowances examples:

• Website development and infrastructure costs.
• Domain names.
• Hardware.
• Operating software that relates to the functionality of a website.

Because the plant and machinery rules apply here, it means that claims can be made as part of annual investment allowance. This gives you a tax deduction for the entire expense for the financial year in which you incur it.

Is it always capital?

Expenses for maintaining and updating your website, e.g. changing product prices or other page content, can be deducted from profits like other day-to-day business costs (usually referred to as revenue expenditure).

Because bookkeeping/accounting and tax treatment of expenditure relating to websites can differ it’s important that a detailed summary of these costs is provided to your accountant when you send them the figures for your annual accounts to ensure they are correctly allocated and the proper deductions are claimed.

Summary

The takeaway points from this article are:

• Consider how you can make your website work harder for you. Treat it like an employee, invest accordingly and it will bring you closer to your prospects and customers.
• Ensure you are taking advantage of the tax benefits of your website investment by ensuring your expenditure is correctly allocated and the proper deductions are claimed.

This blog covers a lot of technical details and tax treatments can differ depending on your circumstances. it would be completely understandable if you feel that you need more assistance or that you need to look into this further. We’re happy to help, simply get in touch.