Once upon a time HMRC used to consider websites as pretty much lumped in with marketing and/or IT costs however, in our ecommerce relevant times, now they're being categorised much more in line with their full finance generating potential.
In order to now correctly categorise costs incurred on your site you should be using your business accounts section when it comes to tax year end balance sheets i.e. profit-and-loss or expenditure.
If you're a small business then web development projects such as redesigns or initial start-ups probably won't be too effected by the new HMRC initiative although, it never hurts to know what's going on so always check with you accountant first to ensure you're staying in line with the tax man.
If you'd prefer to do your own research or you just want to know the essence of the new HMRC policy then check out the 3 step plan below and see how web developments may effect your financial future.
Capital-expenditure and revenue-expenditure are the 2 different accounting methods that you need to get a general understanding of prior to learning where your web developments fit in with your end of year tax statement.
Capital-expenditure takes into account buying something of value that has the potential to create the same value or change in value in the future. For example: buying a motorbike gives you something of value that can again be sold but probably at a depreciated price over time.
Revenue-expenditure basically includes costs that are incurred that are necessary to do business. You won't see much value in them after they've been used and will just take your income in order to produce your yearly profit-and-loss margins. For example: buying the petrol required to help your motorbike get you to work and back.
By recognising both of the above methods you can then deal with them individually and incorporate the results into your final figures to show on the overall balance sheet.
After you've learned the difference between revenue and capital expenditure you can divide your web development costs between both. As HMRC perceives your site as an asset that holds value and may increase value in the future this will fall into the capital-expenditure bracket and become known as enduring assets. This is especially appropriate if the expected net income for your site comes in higher than the development and design costs.
If you've only tweaked or added to certain parts of your site or just spruced up the overall feel then you're probably more than likely to have fallen into the revenue-expenditure section as the general asset of your site hasn't changed, you've just incurred costs due to day-to-day running and maintaining your site.
Differentiate between both capital and revenue expenditure costs and decide which will change the way you calculate your taxes in months to come. Best advice if you're unclear about which category your website designs fall into is to talk to an accountant or a recognised bookkeeper.
Note: In general HMRC only consider redesigns and web development projects to be considerable when they top the one thousand pound mark or when there's a remarkable increase in online sales boosting overall business profits.