Tax Implications of Website Development: Key Insights for Business Owners
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18-10-2023
Developing a new website for your business or giving your existing one a refresh can be an exciting step, but have you considered the tax implications of website development costs? If you’re not sure how to account for your website, read on for a few simple insights on how to navigate this.
What’s Your Website’s Purpose?
First things first, you need to understand the role of your website. Is it simply a digital brochure that showcases your brand? Do you run an online store selling products? Perhaps you offer chargeable business services, or maybe you’re a not-for-profit organisation. Your website’s purpose impacts how you account for it.
Tax for Brochure Sites
If your website primarily serves to promote your brand and provide information, you should record development costs on your profit and loss statement. This approach can be beneficial for your tax bill as it reduces your taxable profits, consequently decreasing your tax liability.
Tax Implications for Online Retailers
If you are an online retailer, think of your website development costs like setting up a physical shop. According to the International Accounting Standards Board (IAS 38 and SIC 32), different stages of website development require different accounting treatment.
- Consider website development itself a capital expenditure, treat it as an asset, and include it in your balance sheet.
- The planning stages and ongoing maintenance costs of a website, once it’s live, count as expenses. You should record these expenses on your profit and loss statement, reducing your taxable profit and, consequently, lowering your tax bill.
Unincorporated Businesses
For unincorporated businesses website development costs are eligible for capital allowances. However, specific allowances can vary from year to year, depending on the Chancellor’s budget. This means the amount of your website development costs that can be deducted from taxable profits will depend on the current tax rules.
Putting Advice into Action
We hope this straightforward guide will get you thinking about the accounting aspects of website development. However, if you’re still unsure about how to account for your website, we recommend consulting your legal team for advice. Speaking to a financial expert will help to ensure you’re on the right track.
Need Some Help?
Now you have a better handle on the money side of things, if you’re ready to talk about a new website or giving your current site a fresh look, we’re all ears.
We’d love to help you bring your online presence to life. Get in touch or book a discovery call to tell us about your web project.