Amortisation Relief: To what Assets does it apply?
Amortisation relief in respect of intangible assets appears to have experienced a bit of a rollercoaster ride throughout the various legislative amendments in recent years. CT relief was initially allowable for amortisation of goodwill until restrictions were made for connected company acquisitions of post-March 2002 goodwill after 2nd December 2014.
Hardly any time had passed before it was then decided that amortisation was not allowable for post 7 July 2015 transactions on ‘relevant assets’.
Finance Act 2019 is now partially lifting the blanket on the CT relief for amortisation of goodwill and related assets. The new rules, set out in Part 8 Chapter 15A of CTA 2009, apply to amortisation on the acquisition of relevant assets where they are acquired as part of a business acquisition which also includes the acquisition of qualifying IP asset.
The rules allow amortisation relief at a fixed annual rate of 6.5% for relevant assets. The definition of relevant assets is now set out in s879A CTA 2009 and are as follows:
- an intangible fixed asset that consists of information which relates to customers or potential customers of a business,
- an intangible fixed asset that consists of a relationship (whether contractual or not) between a person carrying on a business and one or more customers of that business,
- an unregistered trade mark or other sign used in the course of a business, or
- a licence or other right in respect of an asset within any of paragraphs (a) to (d)
A qualifying IP asset for the purposes of the new amortisation rules is defined in section 879J CTA 2009 and is an intangible fixed asset that meets the following two conditions:
- that the asset is (or is an equivalent right under non-UK law) a:
- registered design;
- design right;
- plant breeders’ right;
- right under the Plant Varieties Act 1997, s. 7; or
- a licence (or other right) in respect of any of those rights; and
- that the asset is not to any extent:
- an excluded asset (within CTA 2009, Pt 8, Ch 10);
- a pre-FA 2002 asset (within CTA 2009, s. 881); or
- computer software.
The new rules apply to assets acquired/created on or after 1 April 2019 and for straddling accounting periods, these are treated as separate accounting periods for the purposes of the new amortisation rules.
Although this may be a welcome change in the rules for many corporates, be aware of the potential restrictions and availability of the relief. The new legislation continues to restrict relief on amortisation of goodwill on an incorporation event. In addition, no relief would be available where the relevant asset is not acquired as part of a business acquisition or, where there is a business acquisition, but no qualifying IP assets for the continuing use in the business are acquired as part of the transaction.