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Your website costs – asset or expense?

Tax Deduction. Business Concept Cartoon Illustration.

Fairly recently changes to a financial document called FRS 102 came into force. It has implications for companies that have commissioned a website from Oxygen.

If your accounting period started in 2015 (for medium to large companies) or after January 2016 (for small companies), then the FRS 102 changes affect you. It means that websites and software could be reclassified in your accounts as intangible assets, and that all intangible assets are deemed to have a finite useful economic life – up to a maximum of 5 or 10 years.

Your website costs would previously have been treated as an expense – not as an asset. So the whole cost went into your accounts to reduce your profits – and hence reduced your tax bill.

In theory you can now choose how to classify your website development costs – so you could alternatively opt to treat them as an asset on your balance sheet which would boost profits. In future years the asset will be depreciated, which will be set off against profits.

You may want to do this if you’re applying for funding or want to reassure suppliers of your financial position (credit rating). This is also an opportunity to make additional claims for RnD tax relief/credits.

You’d need to speak with your accountant, but FRS 102 gives you a chance to use the costs of your website to your own financial advantage.

Steve Lodge: Steve trained as a NCTJ journalist and is an experienced copywriter. He has over 15 years in agency, and started Oxygen in 2002.