Corporate intangibles tax treatment

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Corporate intangibles tax treatment
  • Tax treatment of intangibles
  • Generally accepted accounting practice
  • Relief for accounting amounts and tax adjustments required
  • Sale of an intangible asset by a company
  • Assets acquired or realised together
  • Intangible assets and related parties
  • Negative goodwill
  • Election for writing down at fixed rate

Tax treatment of intangibles

The basic rule is that the tax treatment of qualifying intangible fixed assets acquired or created on or after 1 April 2002 broadly follows the accounting treatment under generally accepted accounting practice (GAAP) (see below). This includes amortisation, royalties paid and received, revaluations, and reversals of previous gains and losses. Therefore, for trading intangible assets, the debits and credits in the financial statements will not need to be adjusted in the corporation tax computation. However, major restrictions apply for debits relating to goodwill and customer-related intangible assets depending on the date they were acquired or created, see the Goodwill and other customer-related intangible assets guidance note.

For information on which assets fall within the corporate intangibles regime, see the Definition of intangibles guidance note.

Generally accepted accounting practice

GAAP, for the purpose of the tax treatment of intangibles, means UK GAAP or International Accounting Standards (IAS). From 1 January 2015, UK GAAP is likely to be FRS 102 for most companies with special measurement and / or disclosure rules for small companies and micro-entities.

CTA 2010, s 1127

The following schedules in the financial statements should be reviewed to determine whether any adjustments in respect of intangible assets need to be made for each accounting period:

  • the profit and loss account, income statement, or statement of comprehensive income
  • a statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity, or statement of income and retained earnings
  • any other statement of items brought into account in calculating the company’s profits and losses for that period. It does not, however, include amounts recognised to correct a fundamental error

It is individual company accounts which

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