Partnership making payments in advance for Bespoke software

Partnership making payments in advance for...

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I have a partnership & on looking at the expenses I see monthly payments of £3500.00 going out for what it turns out is bespoke software that they are having written, this will streamline some of their manual process. Further investigations show that this will not be ready for some 18 months. Now this client is going to have a complete throwing the toys out of the pram moment when I try to explain to him that it is an asset that has not yet been brought in to use … …if I have made any incorrect assumptions please advise …as missing tax relief on 28 k in a tax year is substantial.

So to clarify I have £28k in the 13/14 tax year of payments made I will have 42k in 14/15 and in 15/16 14k …so 15/16 is when I can claim capital allowances on 84k……

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By johngroganjga
15th Aug 2014 11:49

Yes you have to look at what it is a payment for the purchase of. If for bespoke software that is by its nature capital then of course the payments on account of the purchase consideration are not revenue expenditure.

But is it capital expenditure for CA purposes only when the software is complete and brought into use? There I am not so sure, but that takes me out of my comfort zone, so I will leave others to opine on that point. I imagine there must be lots of case law. Lots of big capital projects are paid for well in advance of completion.

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By ann domonkos
15th Aug 2014 12:13

Buying off the peg and outright or leased is easier

I have been looking at this ;

http://www.hmrc.gov.uk/manuals/camanual/CA11800.htm.

 

 

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