Tax deduction for website costs

The Taxman will try to deny tax relief for the costs of websites. Read on and we’ll tell you how to justify a claim for these costs.

The Taxman will argue that the web site is an electronic shop window for your business and thus is a capital asset. He will then deny tax relief on the basis of tax rules for capital assets.

However, your starting point should be the accounting rules rather than the tax rules when deciding how to treat your website costs. These rules (UITF 29) state that you cannot capitalise the costs if the website will not generate direct online sales of your product. So, if you do not partake in ecommerce you should write off the costs of the website immediately which will mean a tax deduction automatically follows. Hence the cost is not capital and you can tell the Taxman that the tax rules for capital assets are a non-starter!