Browse by topic. Help videos. Community Community home Discuss your taxes. Community Support TurboTax View all articles. Enter a search word. Turn off suggestions. Enter a user name or rank. Turn on suggestions. Showing results for. Licences and rights over software, website development costs and domain names will often be accounted for as intangible assets, and will therefore fall within the intangible assets regime provided they are created or acquired from an unrelated party on or after 1 April Where this is the case, the tax relief will follow the accounting treatment with amortisation or impairment of the asset usually deductible for tax purposes as and when recognised in the accounts.
It should also be noted that software is excluded from the intangible assets regime 2 if:. Where any of the above applies to exclude an asset from the intangible assets regime, it may qualify for capital allowances instead. It may be beneficial to make an election under s CTA if claiming capital allowances would give relief faster than deducting the amortisation or impairment costs recognised in the accounts for example, because the Annual Investment Allowance AIA will cover the expenditure in full or the intangible asset will be amortised over a long period.
The following HMRC guidance may be useful in determining the correct tax treatment of digital expenditure:. Note that an LLP is a body corporate, but treated as transparent for tax purposes. For an LLP, the relevant question will be whether the member is an unincorporated entity or company. Skip to main content. Tax treatment of software and website costs. Broadly the tax treatment of such expenses will depend upon: whether they are capital or revenue in nature for tax purposes; whether they are incurred by an unincorporated business e.
The potential consequences of these issues can be summarised as follows: This article takes a brief look at the above questions and sets out some practical points to consider when determining the tax treatment of software and website costs. Capital or revenue expenditure? Two of the key tests for expenditure to be capital in nature are: Has an identifiable asset been acquired, disposed of or modified?
If acquired for a lump sum, what the useful life of the software is. However, it should be noted that: The salaries of IT staff will not normally be capital expenditure unless some major new project can be identified.
If staff are making only piecemeal changes or minor improvements to software, their salaries are likely to be revenue costs. Domain names. Operating software that relates to the functionality of a website.
In particular, HMRC will normally accept that the following are revenue costs: Initial research and planning costs prior to deciding to proceed with development. You should treat computer programs of any type and data of any kind as computer software. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is sometimes transferred by electronic means, for example it may be downloaded over the Internet.
Software acquired that way is also plant. A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right. To help us improve GOV. It will take only 2 minutes to fill in.
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