Trade intangibles

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

  • Trade intangibles
  • GAAP
  • Tax adjustments required
  • Changes in accounting policy
  • Negative goodwill
  • Election for writing down at fixed rate
  • Rollover relief

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 GAAP (see below). 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 acquired on or after 8 July 2015, and on such assets acquired by a company from a related party on incorporation between 3 December 2014 and 7 July 2015 and on or after 1 April 2019, which are detailed below.

An overview of the rules and further discussion on some of the more common nuances are detailed below. Full, in depth commentary is contained in Simon’s Taxes Division D1.6 (subscription sensitive).

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

GAAP

Gains and losses on intangible assets for tax purposes are the gains and losses for accounting purposes. Acceptable accounting policy is under UK GAAP or International Accounting Standards. 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.

If a company’s accounts are not in line with GAAP, then the tax computation will require adjustment to give effect to debits and credits relating to intangible fixed assets as if the accounts were GAAP compliant. This has limited relevance to owner-managed businesses but may for instance affect branches of foreign companies.

In computing taxable amounts, the following company statements are taken as starting points:

  • the profit and loss account, income statement or statement of

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