Question

We are a not-for-profit registered charitable association. Our auditors have suggested that the cost of upgrading our website may be able to be capitalised as an intangible asset and written off over the next few years. Is that correct?

What would be the recommended depreciation rate on a straight-line basis?

Answer

As you are a charitable association, you don’t pay tax and the capital allowance rules in the tax regime are not relevant.

Under usual accounting treatment, if the website upgrade represented a replacement or a significant extension of your existing website, it could be treated as capital expenditure and depreciated over a number of years.

You should estimate the likely period until the next significant upgrade in order to determine the depreciation rate. If, for instance, you determine the next significant upgrade will occur in four years’ time, you should depreciate the expenditure at the rate of 25% per annum on a straight-line basis.

Disclaimer: We believe this information to be correct at the time of publication. It is general in nature, for guidance only and is not intended to be personal advice. It should not be relied upon without obtaining professional advice regarding your direct circumstances. No responsibility can be accepted by any publisher, author, editor, contributor or consultant for loss occasioned directly or indirectly to any person acting or refraining from acting wholly or partly upon or resulting from the material in this publication nor for any error in, broken link or omission from the publication.

© Copyright Andrew Lovett – All rights reserved. No part of this publication may be republished in any form or by any means, electronic, photocopying, recording or otherwise, without written permission.