Costs less than £100,000 on any individual piece of equipment (including enabling works and excluding any maintenance or service agreement charges) is below the capitalisation threshold and as such will be classed as revenue.

Component parts worth less than £100,000 which are put together to make a single functionally-dependent asset may be considered as capital and should be commissioned as one single asset.

Enabling works are considered to be works specifically needed to allow the equipment to be installed in the specific location. These can include both specific infrastructural or structural needs.

Other ancillary items such as installation costs, non-recoverable VAT, taxes and duties should be included as part of the capital value. Maintenance, service agreements, insurance, training, carriage, removal/decant costs are not deemed capital.

Purchased Software Costs

Software is capitalised if externally purchased software and the wholly attributable external implementation costs as set out below exceed the £100,000 threshold. 

Software implementation generally involves five phases.  These phases and their characteristics are as follows:

1. Preliminary project phase – Stage when conceptual formulation of alternatives, the evaluation of alternatives, the determination that the technology needed to achieve performance requirements exists, and the final selection from among the alternatives is made.
2. Application development - Design of chosen path including software configuration and software interfaces.
3. Implementation phase – installation and implementation of configuration and software interfaces as design in the previous phase
4. Testing phase – testing including parallel processing phase
5. Post-implementation, post-testing/operation phase - training and application maintenance activities incurred after phase three/four is complete.

Costs associated with the preliminary project and the post-implementation phases should be expensed as incurred.

External costs, for those actions which could not be undertaken internally due to the specialist skills require, associated with the application development and implementation phases should be capitalised.  These may involve the acquisition of computer equipment or third party software.

Costs to develop or obtain software that allows for access or conversion of old data by new information systems should also be capitalised.

Training costs are not implementation costs and should be expensed as incurred.

Capitalisation of costs begins when the preliminary project phase is complete. 

Capitalisation ceases no later than the time at which the implementation phase is complete and the software is ready for its intended purpose or rendered in service.

Upgrades and Enhancements - In order for costs of specified upgrades and enhancements to internal-use computer software to be capitalised, it must be probable that those expenditures will result in additional functionality -- that is, modifications to enable the software to perform tasks that it was previously incapable of performing. Upgrades and enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications.

Internally-developed software and Web-development costs

Design and content costs relating to the development of internal software and websites to support specific teaching or training courses, or for specific research projects, as well as design and content costs for websites that are the general use of the institution and its staff are written off as incurred. 

Costs less than £150,000 for an Estates building project is below the capitalisation threshold and as such will be classed as revenue.

There is, however, a proviso with regards feasibility study costs in that the costs, whilst in general less than the £150,000 threshold, can be capitalised for projects anticipated to become a much larger project (overall spend greater than £150,000). The project code should be tagged with a note for a follow up review (the project may be discontinued if found not feasible and as such any costs would be written off as revenue).

Under these rules if expenditure on an integral feature represents the whole, or more than 50%, of the cost of replacing the integral feature, then the whole of the expenditure will be treated as capital expenditure.

Any individual heritage asset costing more than £50,000 will be capitalised (works of art and other valuable artefacts).