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HMRC internal manual

Business Income Manual

Capital/revenue divide: computer software: in-house software development costs: abortive expenditure

Whether the expenditure is capital or revenue does not depend on the success of the project

Whether expenditure on computer software is deductible in computing the taxable profits of the trade, profession or vocation depends on the same criteria as expenditure which had a successful outcome - see BIM35325.

Abortive capital expenditure on computer software qualifies for machinery and plant allowances (CAA01/S71 - see CA23410 and CAA01/S67 - see CA23350).

Thus for all practical purposes there is no scope for arguing that abortive expenditure on software is neither revenue nor qualifies for capital allowances.