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New Website Costs

I am starting an online retail website in the new year so I can begin to sell some of my products online to a wider market. A company has quoted me £3,000 to set up and design the website and another £250 per annum to maintain the site for me. How is this treated in my accounts?

HMRC actually advise in their staff manuals that the initial cost of “bringing into existence an asset or advantage of enduring benefit to the trade” is treated as capital expenditure, and is not deductible in full.

Instead, you will need to include this as an asset in your accounts, and claim capital allowances on the expenditure relating to the creation of the website. From April 2008 this expenditure will qualify for the Annual Investment Allowance (AIA) of 100% on the first £50,000 of expenditure in that year. Prior to this it will qualify for 50% First Year Allowances (FYAs). 

HMRC actually compare the cost of a web site to that of a shop window. The cost of constructing the window is capital but the cost of changing the display from time to time is revenue. There is an argument if your website was purely used for advertising your business the cost could be set off against your profits in full, but as you are using yours to sell items then it should be capitalised.

You will however be able to claim the £250 cost of maintaining the website as expenditure against your business profits each year.

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