The year is 2019, and websites are easily one of the most important tools for any business. However these tools are not free, and the expenses behind them can start to mount up quite quickly. Domain name costs, hosting costs, design and development costs, updates, maintenance, backups, redesigns and redevelopments - the list goes on. That often causes people to lump website costs together with other business overhead, and miss a valuable opportunity for additional tax allowances.
The fundamental decision you have to make is between claiming your website costs as a revenue expense or a capital expense. The answer will depend on the type of website that you have, and what it offers for your company.
Revenue expenses generally apply to a specific tax year, which is why they are claimed within the tax year the expense was incurred. Capital expenses, on the other hand, occur when you spend money on an asset that provides value for multiple tax years, typically in the form of equipment or machinery which provides the possibility of capital allowances in your tax return. For example, a new computer is a capital asset because it will ideally last several years. For a while this type of physical asset was the only sort of expense that could be claimed as a capital asset and therefore qualify for capital allowances.
Unfortunately, despite the fact that it's 2019, HMRC is only just beginning to appreciate the nuances of website expenses. Since a website is not a physical item, it wasn't considered a capital expense until very recently. A website may provide value for several years before it needs to be redesigned and refreshed, making it a prime candidate for a non-physical capital expense and therefore capital allowances.
However, as mentioned earlier, it depends on the function of your website and it is important to understand and get this right so check with your accountant first.
If your website is a simple showcase of your address and contact information, it's a fairly basic site that doesn't really differ from an advertisement, and so it should be regarded as a revenue expense.
If your website offers e-commerce sales or other forms of value beyond simple online advertisement, then it could be regarded as a capital expense and claimed over the course of several years. Examples of this added value include detailed product information, digital product purchase or any other element that directly helps you to generate sales.
To claim your website as a capital expense, you need to define a lifespan of the asset, just as you would for a physical item that eventually needs to be replaced. Most websites are redesigned and refreshed every 3-5 years, so assuming 4 years is a safe average when claiming percentages per year.
Regardless of the function of your website, monthly & yearly costs such as hosting, domain renewals, updating and maintenance can all be considered revenue expenses.
If you want to learn more about the HMRC's official position, you can find the appropriate section of the Business Income Manual here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35800
