Software recorded as asset?

[FishedIN]

I have a Ltd company and I've developed some software that I hope to be of commercial value in the future. I developed this in free time - no outside providers were used and the software is a product offering of the company.

Is there a way to record this as an asset given that to date no money has changed hands? How can I assess the book value of the software - do I use hours required to build, or income generated? Or does the software have no value?

Is there a tax advantage of recording the asset this way - e.g. could I use depreciation of the asset to reduce corporate tax liability in year 2?

[DaveB]

I have a Ltd company and I've developed some software that I hope to be of commercial value in the future. I developed this in free time - no outside providers were used and the software is a product offering of the company.

Is there a way to record this as an asset given that to date no money has changed hands? How can I assess the book value of the software - do I use hours required to build, or income generated? Or does the software have no value?

Is there a tax advantage of recording the asset this way - e.g. could I use depreciation of the asset to reduce corporate tax liability in year 2?

Not sure about the asset value side of it but IIRC you can claim back CT on R&D costs incurred in developing it.

[Clare@InTouch]

You can get tax relief for Research & Development, but there are some harsh criteria you need to meet. HMRC actually have useful information on this:

Your company or organisation can only claim for R&D Relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty - and not simply an advance in its own state of knowledge or capability.

HM Revenue & Customs: Research and Development (R&D) Relief for Corporation Tax

[FishedIN]

Thanks for the replies.

Do you know how I can record the software as an asset?

[Wanderer]

Is there a way to record this as an asset given that to date no money has changed hands? How can I assess the book value of the software - do I use hours required to build, or income generated? Or does the software have no value?

Hmm, so I could write some software worth (say) £100k, put it on the company books then depreciate it over the years and claim it as a loss against tax?

Nice try but I don't think so, some how.

[VectraMan]

I think you have this backwards. It's not an asset you've purchased where you can spread the cost for CT over a couple of years, it's effectively work that you've done but haven't been paid for yet. If you declare it, you'll have to pay CT on your estimated value of the product.

I think.

[PAH]

In the past (having tried a few pitiful plan B's that only generated minimal revenue) the only time the software (websites in my case) became accountable were:

(a) costs of tools and equipments used to develop and host the software, purchased through the company, any hardware (and possibly expensive software) could be treated as an asset.

(b) revenue generated is treated same as revenue generated via contracting (i.e. only pay tax on company profit at year end)

(c) sale of software treated as revenue generation same as for (b).

So in summary, the actual software only has value from an accounting point of view when selling it, but the cost of tools used to develop it can be used in the accounts to lower overall tax.