Corporate Intangible Fixed Assets regime: condoc outcome

HMRC have published ‘Review of the corporate Intangible Fixed Assets regime: summary of responses’, which contains detailed proposals for partial reinstatement of relief for goodwill acquisitions.

The consultation, ‘Consultation: Review of the corporate Intangible Fixed Assets regime’, aimed to enable the government to examine whether there is scope to simplify the Intangible Fixed Assets (IFA) Regime and ensure a fairer and more consistent approach between tax and accounts.

Respondents to the consultation:

Were in favour of simplifying the regime.
Were in favour of increasing the scope and generosity of the relief.
Viewed the 2015 restrictions introduced to goodwill relief as impacting UK’s competitiveness.
Considered the pre-2002 fixed assets exclusion from the IFA regime complex.
Were of the view IFA de-grouping should be aligned with capital gains rules.

Further to the responses, the government will:

Not remove the exclusion relating to pre-2002 assets:
- To do so would have limited effect on investment compared to reinstating some form of relief for goodwill acquisitions.
- It would come at a significant cost to the Exchequer.
From 1 April 2019:
- Re-introduce relief for goodwill acquisitions up to the fair value of eligible Intellectual Property (IP) in the acquired business.
- Eligible IP will include patents, trademarks, registered designs, copyrights or design rights.
- Relief will be based on the amortisation in the accounts, or at a fixed 4% per annum for acquisitions of goodwill (relating to the IP) on or after 1 April 2019.
- The consultation response gives the following example of how the relief will work:
  - Company A acquires the business of company B for £100 million. At the time of acquisition, company A accounts for the cost as £20 million of eligible IP assets, £50 million of tangible capital assets, and £30 million of goodwill. The new relief would provide relief for the amortisation of £20 million of that goodwill.
- From 7 November 2018:
  - Effect legislation in the Finance Bill 2019, so that de-grouping that occurs as a result of a share disposal that qualifies for Substantial Shareholding Exemption (SSE) will be tax neutral for assets within the IFA regime.