Following a consultation in 2018, Finance Bill 2019 provides for a fixed rate writing down allowance for goodwill and other intangibles created or acquired by companies on or after 1 April 2019 where they are acquired alongside qualifying intellectual property (IP) assets.
Since July 2015 there has been no corporation tax relief available for amortisation on Goodwill or other customer related intangibles, regardless of whether they were acquired from a related party or a third party.
In their response to the 2018 consultation the government announced that relief would be reinstated based on amortisation in the accounts or a fixed rate of 4%.
However the draft Finance bill clauses instead introduce a fixed rate allowance of 6.5% per annum which will apply in only certain limited situations.
The relief will be:
- Available where the asset is acquired as part of the acquisition of a business and 'qualifying IP assets' are also acquired.
- Capped at six times the expenditure incurred on qualifying IP assets.
Goodwill acquired prior to 1 April 2019 will continue to be subject to the tax treatment prevailing at the time it was acquired.
Links to our guides:
Goodwill and the intangibles regime
A guide setting out what is goodwill and intangibles and how they are treated for tax purposes which includes new and old rules.
Goodwill & Tax: changes under the new UK GAAP - FRS102
This guide explains how goodwill is treated under UK GAAP and FRS 102.