The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Sales or acquisitions of businesses are likely to include the transfer of intangible fixed assets (IFAs) such as goodwill and / or other intellectual property.
The accounting definition of IFAs (other than goodwill) is set out in FRS 102, s 18.2 and is ‘an identifiable non-monetary asset without physical substance’. IFAs have a continuing use in the company’s trade.
Goodwill is covered by FRS 102, s 19.22. Goodwill is measured at cost, defined as the excess of the cost of the business over the acquirer’s interest in the net amount of identifiable assets, liabilities and contingent liabilities, measured in accordance with the rules within that section.
Goodwill may be personal, connected with the premises (for example a hotel), or associated with the brand or trade name. There are many other types of intellectual property such as patents, know-how, designs, processes and customer lists.
This guidance considers some of the relevant tax issues arising on a transaction structured either as a transfer of trade and assets, or as the sale of shares in a company which owns goodwill or other IFAs.
The rules governing the taxation of IFAs have been subject to several changes, so it is important to be aware of the dates of acquisition or creation of the IFAs in question.
The tax treatment of IFAs acquired from an unconnected party after 1 April 2002, follows the accounting treatment of credits and debits arising from those assets. In other words, credits are taxable and debits deductible. However, for goodwill and customer-related intangibles acquired on or after 8 July 2015 and before 1 April 2019, tax relief has been severely curtailed, as relief is denied for any amortisation or impairment (accounting debits) of those assets. From 1 April 2019, there is limited relief where the go
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