CA23410 - PMA: Computer software: Computer software and rights are plant

CAA01/S71

Treat computer software as plant whether or not it would normally be regarded as plant. You should also treat capital expenditure incurred on the right to use or otherwise deal with computer software as plant.

Computer software is not defined in the capital allowance legislation. You should treat computer programs of any type as computer software but not the information stored on the software such as the contents of a spreadsheet. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is often transferred by electronic means, for example it may be downloaded over the Internet. Software acquired that way is also plant.

A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right.

Intangible fixed assets regime

For companies, the intangible fixed assets regime (CIRD10000) takes precedence over the capital allowances regime. However, capital allowances may still be claimed for capital expenditure on computer software where:

  • computer software is treated as part of the cost of a tangible fixed asset (such as related computer software) for accounting purposes (CIRD25140); or
  • the software is now treated as an intangible asset for accounting purposes, but previously fell to be treated as a tangible asset for accounting purposes and a Plant and Machinery allowance was made (for example, CIRD25145); or
  • an election is made to exclude capital expenditure on computer software from the intangible fixed assets regime so that capital allowances can be claimed instead (CIRD25180).

Capital expenditure on computer software

Capital allowances can only be claimed for computer software where capital expenditure has been incurred. There is detailed guidance on the capital/revenue divide in context of computer software at BIM35800.