Back to the case I quoted, if you look at it you will see it is a 1965 case, now correct me if i’m wrong here but did we have an internet then? And is this case really still applicable to websites?

I have given details on how the tax legislation treats a website, I have given details on how the UIFT Abstract over rides this old and outdated legislation, beyond that it is down to the accountant to advise on the particular situaiton.

I do however feel you have missed the point Den, please read the UITF Abstract, then look at the tax case of Strick V Regent Oil Co Ltd, then look at accountingweb to see how many times the quesiton comes up on how do I treat website costs of £x for Y situation, then you will understand where the posting came from.

This is yet more evidence of how many accountant/tax advisors get tangled up in website costs, in the main this will be a mute point for many of you, as many of you will be paying monthly, in which case it is an expense and the vast majority will not have a business that runs solely on their internet website (full online booking system) in which case the costs should always be expensed to give an accurate reflection in the accounts of the situaiton, which is done in accordance with UITF Abstract 29.

More important from a business perspective – why put the client through such crap. Expense as a leased item – that’s how a LOT of software is treated these days.

Also, most websites the actual cost of the ‘shopping cart’ section would be small, therefore splitting out this element would not really be possible, not material.

If, like me, you would expense the whole amount, as you quite rightly state Dennis, then you would do so in accordance with UITF Abstract 29, which in short states ‘website development and design costs should only be capitalized if it can be shown that the expenditure will create an asset that has a long-term net benefit for the business’.

That said, there are cases where a business that is run on the internet with a database sat behind a full booking system website where no involvement is required from a person as it is automated, then that may be a website you want to capitalize as it does not conform to UITF Abstract 29, or does it? ‘Long-term net benefit’?

What about wider implications, if the website has cost a lot of money and the website is effectively your business then surely this is something you would need to consider having on your balance sheet? Having it on your balance sheet may also be more in line with the UITF than not!

I totally agree though, adopt saas and never worry about the complex area of websites and the taxman!

Amasing isn’t it, something as simple as a website here in the UK has a complicated set of rules to look at!

Second, only people who have been shockingly advised or are being ripped off spend oodles of money on websites. Even where you can point to asset basis then I’d argue ‘short life’ at worst and lease at best.

Bottom line – software is a cost of doing business and should be expensed accordingly. If the idiosynchrosies of the rules appear to catch the user out, then structure the deal accordingly.

End note – a good case for adopting saas, which most certainly IS an expense.

The reason I made this posting, we are seeing more and more people who have websites and it is common to see over at accountingweb this question again and again from accountants!, and more recently we have been asked this question a few times, so I thought it was time to clarify the position.

The cost of the part of a website that generates sales is a capital expenses the rest is revenue, as are future updates.