Here\’s a little something I\’d like to know about a piece I need to write over the weekend.
A software manufacturer is moving their customers from a buy a permanent license and buy the upgrade every couple of years to an online pay a monthly fee and get the upgrades as they come.
The software suite costs, say, $2,000. Now, with that sort of money, how would the buyers be accounting for it?
Obviously, the monthly fee is now just going to be operating costs. Just like the electricity required to run the computers. But before that: with 2k pieces of software. Would they have been writing that off in year one? Heck, it\’s an operating cost so the hell with it? Or would they have been forced to depreciate it over time?
My guess is that a £50 piece of s/ware just gets writtne off an an operating expense. A £5 million investment in Oracle is a capital expense amortised over time. But where\’s the cut off point for one treatment and the other? Are there HMRC rules on this or is it, well, depends?