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Cloud Software - AIA Claims for CT

We have customised some software and wish to claim AIA

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Hi - I am a Finance Manager in a Ltd.

We have some cloud based software which we have paid a 10k "access payment" for, and then we have very heavily customised ourselves (because the software was skeletal and is 100% intended to be customised by businessess using it). We have a service agreement which we pay monthly which pays for support, billed by use.

Currently, i am expensing the service agreement costs through the PnL. 

The access payment for the initial software and also our time in labour to customise it, i have capitalised on the balance sheet. The project is almost complete and it will start depreciating next month. However, I am unsure if we have classified it correctly.

I am wanting to claim AIA for the project. All costs for it have been within year, it may be cloud based, but it is "ours" with our GDPR data on it. It cannot be "physically"  removed from the provider, but we can sell it on as a package to another (provided they also take on the service agreement).

It is the only "tool" of our business and therefore we consider it to be plant/machinery.

On this basis, can the initial costs (paid to the company via invoice) and wages to customise (paid to staff in year) be claimed under AIA?

I have read just about every document HMRC/ACCA have issued on the topic, and it still seems grey... i am comfortable with its capitalisation - it is where we go now..

 

 

 

 

Replies (11)

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By Hugo Fair
19th Sep 2021 14:25

You need to talk to your accountant, not a bunch of strangers who aren't privy to any of the salient facts.

The vast majority (nearly 100%) of software licences are 'licences to use' (and do not transfer any ownership) - with continuing use dependent on adherence to various T&Cs such as annual maintenance/support fees to the original developer (without which the software cannot continue to be used).
To say that 'it is "ours" with our GDPR data on it' is either a non sequitur or shows a complete misunderstanding of the relationship between data and software. If you rent a container and put a pile of paper-files inside it, the container doesn't suddenly become "yours"!

Then there are other possibilities to which you haven't alluded - such as whether the customisation work would be eligible for R&D tax credits. If you truly believe that this work is sufficiently innovative and relevant to lead to future sales (ignoring issues to do with licensing etc), then it's worth considering.

I know I've not attempted to answer any of your specific questions ... that is deliberate.
My point is you're scratching at only a couple of aspects that may be relevant, and only (naturally given the limitations of a public forum) providing a smidgen of relevant info. Both of which would be addressed by talking to your accountant.

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Replying to Hugo Fair:
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By Paul Crowley
19th Sep 2021 14:28

R & D is where I expected the post to go
It didn't

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By B House
19th Sep 2021 14:24

Hi
I am not suggesting we "own" the software, not at all. It is basically a CRM system which forms the substance of our business. There isnt a fixed term license involve here.
The "project" is what I am looking at capitalising, the customisation of the software i am looking to claim relief on.
I am satisfied that the work done meets the criteria for capitalisation. It is whether it meets the criteria (which frankly looks a bit grey!) for AIA is the issue.

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Replying to B House:
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By Paul Crowley
19th Sep 2021 14:30

Best left to the accountant
Wages paid usually qualify for tax relief

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By B House
19th Sep 2021 14:48

Hi
It is not in R&D because this does not qualify for R&D?
There are no "unknowns" being addressed here, we are not resolving any issues of scientific or technological uncertainty.

We have simply customised some software for own use and need some advice on allowances!
We have asked our accountant, he said he wasnt sure but "thought" it might qualify as plant - he said "whatever you think".

I am asking the community, what you all think. Is it "plant" and does it qualify for for AIA?
If you dont know the answer or have nothing constructive to say, then sometimes it may be best to simply say nothing.
Otherwise what should be a supportive, open and healthy discussion forum, degrades into something rather dark and well, sad.

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Replying to B House:
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By Hugo Fair
19th Sep 2021 16:54

Seriously?
An open and healthy discussion forum is not usually distinguished by all the input coming from one direction (members) with all output being taken by you ... or is that how you carry on all your 'discussions'?

If you really have a accountant whose response to a valid query was "whatever you think", then that was neither professional nor what you are paying for.

BTW it's a good idea to keep the supply of info consistent. You now say 'I am not suggesting we "own" the software' - whereas in OP you said that 'it is "ours"'. One or other of these statements cannot be true.

David has given you a couple of places to start ... but as I said previously, there is insufficient info here to give you a categoric answer to your question, plus the likelihood of there being other inter-related aspects of which you may or may not be aware. Hence the need to talk to a retained accountant, who with all the necessary details to hand should be able to give you what you need.

If you see this as dark and sad, then I feel for your sensitivities but you came to the wrong place.

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Replying to B House:
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By Paul Crowley
19th Sep 2021 17:20

Nothing on your OP said that you had an accountant and that you had discussed it with him

His comment "whatever you think" was more likely aimed at the capitalisation of wages paid, which was probably not related to tax issues

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By David Ex
19th Sep 2021 15:05
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By B House
19th Sep 2021 15:12

DavidEx - thank you so much!
So our accountant was right then, it does qualify as "plant" and can therefore claim AIA!

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Replying to B House:
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By AdamMurphy
19th Sep 2021 16:51

HMRCs view is not always the same as the law.....

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Replying to AdamMurphy:
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By B House
19th Sep 2021 17:08

Hi,
On this topic, why would it not be? Because part is our labour from customisation?

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