I need to know about expenses: I’ve read lots on CUK about expenses but can’t find specific answers or advice around either.
Ques: Can I put the design and build expenses of my company website through the company? In the past, the company used a free website-builder but now I’ve invested to give the portal a more professional look. Also, I’ve just ordered some letterheads with compliment slips. Previously, as I designed and produced these items myself at no reportable cost I am not 100 percent sure now if these are allowable as a company expenses. I’d say that the website and the stationery are very important for the future success of my business.
Ans: In principle it doesn’t matter that you have shown no reportable cost for your stationery or website in the past, this is not a concern. As long as you can prove that your website, letterhead, and compliment slips are expenses incurred in relation to your business, I am pretty certain that there will be no challenge to any of these expenses by the tax authorities. However, you must retain all invoices and show payments from your business in relation to these expenses in case the tax authorities should ask for proof that the expenditure was a legitimate business expense.
With regard to the website, HMRC state that "The treatment of expenditure on developing a website is dependent on the function it performs for the business. If the website is capable of directly generating income so that it will become an enduring asset, consideration should be given to treating the expenditure as capital." The reason I quote this from the HMRC toolkit notes (details below) with regard to your website, is that if your website is a basic, say, four-page website providing information about your products and services, then you can definitely claim this as an expense. However, if your website is a more complicated e-commerce site that involves buying and selling online, to quote HMRC, "capable of directly generating income" then the costs of designing the website may need to be capitalised. The good news in regard to this, though, is that under the current tax law, you can claim expenses of up to £250,000 in relation to capital expenditure, which means this can be claimed as an expense for tax purposes.
However, you should note that HMRC stipulate that "Even though expenditure on website development may be shown in the accounts as advertising or marketing costs, this does not necessarily mean that it is allowable as revenue expenditure. In order to identify the correct tax treatment the exact nature of the website costs should be examined." In this regard, therefore, it is extremely important that you keep accurate records of this and all other expenditure relating to your business and that you or your accountant make sure that this expenditure is allocated correctly between capital costs, advertising, marketing, stationery, development, etc.
The principle remains, however, that if the expense was incurred as an essential and necessary part of running your business, then the tax authorities cannot disallow the expense. However, as you can see, there are some specific rules and notable exceptions relating to tax law—entertainment being one of them, for example—but from what I can understand from your question, your website and stationery expenses do not fall under these exceptions.To read the HMRC toolkit notes in full go to