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Is My Website a Fixed Asset?

Websites can be expensive – design, content, development all come with a cost. So its worth understanding if your website is a fixed asset.

Treating your website as a fixed asset means the cost is capitalised on the balance and amortised over a number of years.

This strengthens your balance sheet position and means the cost is set against your profit over a number of years rather than all at once.

What is a Fixed Asset?

A fixed asset is something which a business purchases for long term use to generate income rather than to sell onto customers.

For example, a manufacturing business buys equipment to make its product which it sells onto customers.  The equipment is a fixed asset of the business.

What is Fixed Asset Amortisation?

Fixed assets have a useful life to a business.

Useful life means the period of time an asset is used breaking, becoming obsolete or needing replacement. 

That means there needs to be a way to write off the cost of the asset over its useful life.

This is an accounting adjustment called amortisation (a type of depreciation).

Is a Website a Fixed Asset?

Websites tend to fall into two different categories:

  • Ones that give general information about a business, what it does and its team;
  • Or those websites that sell products online.

General Information Websites

Websites that offer general information about a business are not classed as a fixed asset.

This is because they do not directly contribute to generating income. Rather they are used as a form of marketing. 

Therefore the cost of the website must be expensed in full as and when it is paid for. 

Websites that Sell Products or Services

Websites that sell products and services to generate business income are considered a fixed asset. 

A website such as Ted Baker where you can buy clothes would be a fixed asset.

Whereas the website of an accounting firm with details about the firm and its services, would not be a fixed asset.

How to Determine the Fixed Asset Cost of Your Website

Once you have confirmed that your website is a fixed asset you can include all the costs of getting the website launched to determine the cost of the website to be treated as a fixed asset. 

This includes:

  • Design
  • Development
  • Content
  • Templates
  • Labour costs by web developers

Treatment on Ongoing Website Costs

Once you website is launched the ongoing costs of hosting, maintenance and product updates cannot be capitalised as a fixed asset. 

These costs would need to be expensed as they are incurred in the profit and loss account.