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.

Links

Goodwill and the intangibles regime

Corporate Intangible Fixed Assets regime: consultation

Substantial Shareholding Exemption (SSE)

Consultation response: Review of corporate intangible fixed assets regime

Policy paper: Reform of de-grouping charge rules in the corporate intangibles regime