Software costs

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bob22
bob22 Registered Posts: 9 New contributor 🐸
in General accounting discussion
Hi,

Any answers would be appreciated as just spoke with MIP tax helpline (not clear) and HMRC (they didn't know and will get back to me).

Client is developing software. This software is an administrative tool that is specified for clients to use in a particular industry. The income generated will be from selling this software. I am getting different answers on the correct tax treatment of this expense and your thoughts would be appreciated?

Thanks

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  • burg
    burg Registered, Moderator Posts: 1,441 mod
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    I would say that income would be in the form of selling a licence to use the software. The customers wouldn't own the software but the rights to use it.

    Any research may well be pre-trade research and development costs. The rest is surely the costs of creating the product which is to be sold so a cost of sales?
    Regards,

    Burg

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