
Website 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 the existence or that have 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, the capital.
HMRC’s manuals go on to the 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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