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30 Jan, 2024 3 min read

Can I Capitalise Website Development Costs? Our Insight

Can Website Development Costs Be Capitalised? Analysis of the Optimal Financial and Tax Treatment of the Costs of Developing Your New Site or Application
Can I Capitalise Website Development Costs? Our Insight

Can I Capitalise Website Development Costs?

At Steadfast Collective, we firmly believe that the cost of creating and launching a website for your business represents a prudent and viable long-term investment.

However, there is no escaping the fact that websites are not cheap. The expertise, technology and hours of work involved can add up to a hefty bill – which may be hard to swallow if you are a new business and your cash flow is not quite up to full speed yet.

One way to soften the blow is to capitalise as much of the cost of your website development as you can. This means you should record the amount spent as an asset, rather than an expense. The cost is thus spread out over time, and makes a difference to your tax bill as well.

Which Costs Can Be Capitalised?

You should be able to capitalise the cost of your website development, provided it falls under the following categories:

  • Direct costs associated with creating or acquiring a website or web application that will be used as part of your business activity.

  • The site or app is going to deliver economic benefits to your business over a long period, at least two years.

This means that the cost of building the infrastructure of the site can be treated as capital expenditure. That covers domain names, hardware, and the software that you use to operate the website or app on an ongoing basis.

However, you may not be able to capitalise your research and planning costs, or the ongoing maintenance of the site. One compelling analogy is that of a shop window. The cost of building and installing the window is capital expenditure; but the costs of keeping the display updated are likely to be treated as revenue.

If you are able to put your website development costs on your profit and loss statement – and not your balance sheet – you can put those costs against your taxable revenue when the time comes to submit your return.

Your financial department or adviser should be able to explain which elements of the cost of developing and maintaining your website can be capitalised, and which cannot. The result should be that your company finances and tax are operated and calculated in the most efficient way possible.

How Steadfast Collective Can Help Your Website Development

At Steadfast Collective, our core values are creating value, integrity and collaboration. We believe it is essential that our clients can trust us to do the best job possible for them.

Our extensive experience in the creation and development of websites and applications means we are ideally placed to advise you every step of the way. We will be happy to apply our expertise, in conjunction with your tax adviser, to ensure that the cost of your digital transformation is handled as effectively and efficiently as possible.

Please get in touch with us now so that we can begin our conversation about how we can work with you on your web development project.