When it comes to creating, designing, developing and programming a website, the costs associated with it are considered capital assets. This means that you can capitalize on the costs related to the visual impact of the website and its readability. This stage includes the design of the site with backgrounds, fonts, frames and buttons. Just like the costs for developing back-end functions, these development costs will also be included in the balance sheet and amortized. Accounting for website development costs depends on the current stage of site development.
At the planning stage and once the website is complete, all costs are spent as incurred; however, when it comes to website development, the guidance is not as clear. As the site develops, any application software on the website should be capitalized, but other costs should be spent. Updates and improvements to the website can be capitalized on, but only if additional features are added. If you consider that your website is primarily for advertising purposes, you can currently deduct the internal software development costs of the website as an ordinary and necessary business expense. For accounting purposes, entities that have been within the scope of FRS 10 (the financial reporting standard for goodwill and intangible assets) should capitalize on website costs to the extent that they include application and infrastructure development costs, design costs and content costs; and only if they are within the scope of application. Before you can begin to determine the tax treatment for your website development costs, you need to determine what you use your website for.
If you believe that your website is primarily intended for advertising purposes, then you can currently deduct the internal software development costs of the website as an ordinary and necessary business expense. In cases where a taxpayer pays an interior designer to purchase furniture and accessories, as well as make recommendations on a new office design, these costs should be included in the cost of furniture and accessories.
