Whilst the vast majority of businesses will know how essential marketing is to the success of their business, many begrudge paying for it, especially when it comes to digital marketing. Often, small businesses will feel as though there are better ways for them to spend their money, and as soon as they find out that they may have to pay for the design and hosting of their website, they will try to convince themselves that they don’t need one.
However, there is no denying that websites are essential in this day and age, so not having one isn’t really an option. When small businesses realise this, they will then look for ways they can save money. Whilst you can opt for a free website, and they can be a good option for new businesses, often they aren’t suitable long term. When realising that they will have to pay for web design and development eventually, lots of business owners will question whether website costs will be tax-deductible.
Lots of people ask us about tax deductions when they’re interested in getting a website designed, so we have looked into this in more detail below for anyone who is considering getting their business online.
Are you able to claim tax deductions for your website?
As you may expect, the answer to this question isn’t as straightforward as ‘yes’ or ‘no’, and there are many different factors that will influence the response. It is important to note that creating, maintaining and upgrading a website isn’t all tax-deductible in the same way. Also, not all websites are tax-deductible in the same way either, so it can be a lot to get your head around.
What does HMRC think?
Previously, HMRC used to put a website into the same category as a shop window: as something that simply displays your business to customers and isn’t a function in it. So, similarly to the cost of a shop window, they said that website development wasn’t an expenditure, but a capital expense. In short, this meant that a website didn’t qualify for CAs (capital allowances), and therefore wasn’t deductible from a business’s profits.
However, this isn’t the case anymore, and HMRC has since updated their views in this regard. Since lots of websites nowadays provide customers with a way to order products or services and to communicate with a business to find out information about their products or services and these are functions, the rules have changed.
So, HMRC now says that some website costs do qualify for CAs under plant and machinery.
In case you didn’t know, the other types of things that come under plant and machinery are cars, vans, equipment, machinery, computers, furniture, and other similar business items. Because websites can qualify under plant and machinery for CAs, this means that you can deduct some or all of the value of the item from your profits before you pay tax. However, only particular costs will qualify.
What can you claim tax deductions for from your website?
Usually, you will be able to claim anything that’s treated as capital expenditure, such as the following:
- Your website domain name/s
- Your hardware
- Your operating software relating to the functionality of your website
- If you need a new replacement website
However, it is unlikely that you will be able to claim for the following because they aren’t capital in nature and are more often than not considered to be revenue expenses:
- Research and planning costs prior to website development
- Any costs associated with maintaining or updating your website
Understandably, this can all be quite confusing, and if you’re new to running a business or you usually just let your accountant deal with all of your businesses expenses and expenditures, then it really is best to speak to them about your individual situation in more detail.
As tax treatment of expenditure relating to websites can differ so much, we would always recommend that you provide a detailed summary of your website costs to your accountant whenever you usually send them your annual accounts. You can then trust that they will allocate these costs correctly for you and ensure that all deductions are claimed.
Should you create a website anyway?
No matter where your potential website costs will stand concerning tax deductions, it is still always worth paying out for a website. You really should look at a website as an investment because when you have the best web design and you’re providing all visitors with the information they require about your business, more often than not your website will have a good ROI.
Remember, websites don’t have to be expensive either. If your new site doesn’t qualify for CAs or you can’t get any tax deductions at all (which is highly unlikely), it’s a good idea to look for a more affordable alternative. Just make sure that you’re doing your research and shopping around before deciding who you turn to for web design and development.
Working with UENI for web design and development
Hopefully, the information above will have answered the majority of the questions that you have regarding tax deductions for website costs. Of course, as mentioned above, it is beneficial to reach out to your accountant to get specific answers tailored to your individual situation. You can rely on them to provide you with the information that is correct for your website and your business.
If you would like to go ahead and create a website for your business, please don’t hesitate to contact us here at UENI. We pride ourselves on providing small businesses with an easy, low-cost way to get online and reach more of their target audience. We have a few different pricing plans available, all of which are incredibly affordable – including one that is entirely free -, so you’re guaranteed to find a solution that works well for you and your business. We look forward to helping you make the most of this brilliant marketing tool.