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Where Taxpayers and Advisers Meet

Rebranding costs - revenue or capital?

simplytax
Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Rebranding costs - revenue or capital?

Postby simplytax » Tue Jan 23, 2018 5:46 pm

If a services business incurs expenditure on rebranding is there a basis for regarding this as revenue rather than capital expenditure?

Typically such rebranding covers:

1. Re-designed logo and colours with new letterhead, templates, e-mails etc
2. Re-designed sales and corporate literature and brochures.
3. Interior design to office re colours and logo and signs etc
4. Digital marketing strategy and design.
5. New or re-vamped website with new logo, colours and narrative.
6. Search engine optimisation.

Some businesses will need be undertaking a re-branding exercise to refresh their offering more often than others dependent upon their business sector and customers.

If the website is being refreshed and does not have a lot of interaction features and mainly the corporate sale/service offering being advertised online with no income generated from sales online or third party advertising etc can the website costs be regarded as revenue if written off as a cost in the P&L? this seems to be what HMRC manuals infer although a little vague.

How have others been treating the rebranding type expenditure and website expenditure above?

pawncob
Posts: 4297
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Rebranding costs - revenue or capital?

Postby pawncob » Wed Jan 24, 2018 5:21 pm

Rebranding is almost always a revenue item. The original costs were capital. It's akin to repairs and renewals.
With a pinch of salt take what I say, but don't exceed your RDA

bd6759
Posts: 3077
Joined: Sat Feb 01, 2014 3:26 pm

Re: Rebranding costs - revenue or capital?

Postby bd6759 » Wed Jan 24, 2018 5:30 pm

Rebranding is almost always a capital expense. It is not a repair and not a renewal. It is the creation or modification of an asset.

simplytax
Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Re: Rebranding costs - revenue or capital?

Postby simplytax » Wed Jan 24, 2018 6:39 pm

If the business is a large multinational with a certain brand image that is being created or enhanced then re-branding may be an intangible but can't see it as capital asset for smaller services business. It is unlikely any business would capitalise it in its accounts as there is no certainty it would have any enduring benefit and will need refreshed every few years. Consultancy advice on a new logo and colours for letters and other forms of communication, strapline and sales brochures, interior design, digital marketing, SEO etc is in essence marketing spend and revenue I would say.

HMRC in their manuals on website development seem to suggest that unless an enhanced or redesigned website has significant added functionality for a lot of interaction with customers to generate income direct from the website, then such expenditure is likely to be revenue. Refreshing look of a standard website (with little or no functionality), and the narrative from what was there before in my opinion is simply part of advertising online and a revenue expense.

I was looking for comment from any actual experience of the point being considered in practice, or any problems encountered with HMRC.

bd6759
Posts: 3077
Joined: Sat Feb 01, 2014 3:26 pm

Re: Rebranding costs - revenue or capital?

Postby bd6759 » Fri Jan 26, 2018 12:37 am

The logo or "brand" is a capital asset. It does not matter the size of the business.

Creating the design is a capital expense. Once the design is created, it can be used on headed paper and marketing materials. The purchase of that paper and production of marketing material is a revenue expense.

simplytax
Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Re: Rebranding costs - revenue or capital?

Postby simplytax » Fri Jan 26, 2018 12:08 pm

If an asset is created that is registered or trademarked and provides an endurable benefit then yes the costs associated with that may be capital.

HMRC at BIM35640 https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35640 on "expenditure developing a brand" comment that:

"Generally there is unlikely to be a strong case for making a capital argument because the courts have been reluctant to accept that expenditure is capital where no tangible asset has been created. The name itself might be an asset or goodwill may have been created or enhanced. But the reality is often that if anything is created it is transitory and not sufficiently durable to be regarded as capital. This recognises that consumers are often fickle and can change allegiance relatively quickly"

Therefore in smaller service businesses that refresh their image or brand, the typical expenditure noted in the original post is likely to be a revenue expense in the accounts and for tax. Unless anyone has experienced HMRC argue otherwise?


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