As announced in the 2017 Autumn budget, a new consultation has been opened in respect of the Corporate Intangible Fixed Assets regime.

The Intangible Fixed Assets regime (“IFA regime”), was introduced from 1 April 2002 and changed the way the UK corporation tax system treats intangible fixed assets (such as copyrights, patents and trademarks) and goodwill.  As the regime is now more than 15 years old the government wish to examine whether there is scope for reforms to simplify it and make it more effective in supporting economic growth.

The IFA regime provides companies with relief for the cost of acquiring intangible fixed assets by allowing a deduction from income for the amortisation and impairment debits recognised in the accounts. It also taxes receipts in respect of IFAs and goodwill, including disposal proceeds, as income.  While there have been several changes to the regime since 2002, most of them have focussed on closing down avoidance schemes rather than simplifying the rules

The government has identified a number of specific areas where it is seeking stakeholders’ views but they are also generally interested in understanding whether there are targeted changes that could be made to the regime to support its policy objectives of ensuring a fairer and more consistent approach between tax and the accounts and retaining UK competitiveness. The specific areas are:

  • The exclusion of pre-2002 assets from the regime (the pre-FA02 rule)and whether this makes the UK a less attractive location in which to hold IP.
  • The exclusion of goodwill and customer-related intangibles and the impact of this change two years on, including in respect of UK competitiveness in attracting investment.
  • The de-grouping charge specifically in respect of mergers and acquisitions and the difference between IP and other assets in this respect.
  • The use and competitiveness of the election for fixed rate relief at 4% per year as an alternative to the default accounts-based relief.

Comments are invited by to This email address is being protected from spambots. You need JavaScript enabled to view it. by 11 May 2018

Questions:

Question 1: What types of asset are typically affected by the pre-FA02 rule? 

Question 2: What difficulties or benefits has the need to distinguish between pre- and post-FA02 assets caused for your business?  How has the significance of these issues changed over time?  If possible, please provide details of any extra administration and cost this imposed. 

Question 3: What would be the impact (positive or negative) of allowing pre-FA02 assets to come within the IFA regime? 

Question 4: If pre-FA02 assets were brought within the IFA regime, at what value should they be recognised, and why?  

Question 5: How significant would the transitional issues around capital losses and other reliefs be in practice, and what do you consider would be the best way of addressing this potential unfairness? 

Question 6: Do you anticipate any other transitional issues? If so, please provide details. 

Question 7: In what situations do companies pay more for a business than the fair value of the individual assets, and what does this difference represent? 

Question 8: How has the scope of the 2015 restriction – which extends beyond goodwill to customer-related intangibles – impacted on your business? Please explain both the positive and negative impacts, and provide specific examples where possible.  

Question 9: To what extent could changes be made in this area in a way that deals with the issues that motivated the removal of relief in 2015? 

Question 10: To what extent does the IFA de-grouping charge cause difficulties with M&A transactions in practice?  Please provide specific examples where possible.

Question 11: Do you consider that the IFA de-grouping charge could be modified to eliminate such difficulties?  How could this be achieved affordably, while preserving the Exchequer’s ability to claw-back deductions given in excess of the economic cost? 

Question 12: In what circumstances do companies typically elect for fixed rate relief? 

Question 13: Do you consider that the UK’s approach to the elective fixed rate relief deters international businesses from locating intangibles in the UK? 

Question 14: Should the way in which fixed-rate relief is given under the IFA regime be changed?  How would this impact on business decisions? 

Question 15: What are the benefits to the UK of international businesses holding intangible assets in the UK? 

Question 16: How could the IFA regime be made more cost-effective?   

Question 17: Do you have any comments on the assessment of equality and other impacts summarised above?

Links:

Goodwill and the Intangibles regime 

Goodwill & Tax: changes under the new UK GAAP - FRS102 

Finance Act 2017: tax update and rolling planner

Consultation: Review of the corporate Intangible Fixed Assets regime

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