Share with your friends

Review of the corporate intangible fixed assets regime

Review of the corporate intangible fixed assets regime

The Government is seeking comments on how the IFA regime could be amended to help support the competitiveness of UK businesses.


Also on

The UK’s Intangible Fixed Assets (IFA) regime was introduced in 2002 to provide companies with relief for the cost of acquiring intangible fixed assets and goodwill via a deduction for amortisation and impairment debits, and also to tax receipts in respect of these assets as income. The regime was intended to provide fair tax treatment for IFAs that was aligned with the accounting treatment and supported the competitiveness of UK companies, and this review will consider whether the regime continues to deliver on these aims, in particular given the growing importance of intellectual property (IP) to modern businesses.

The consultation document sets out the key areas the review will focus on:

The impact of the 1 April 2002 commencement rule (the ‘pre-FA02 rule’)

Businesses have previously voiced concerns that the pre-FA02 rule provides less generous relief than other countries, adds complexity, and can cause unfair results. The Office of Tax Simplification (OTS) has also previously highlighted the rule as a potential area of reform in its 2017 report Simplification of the corporation tax computation.

The Government therefore wishes to understand what impact the pre-FA02 rule is having on business decisions in practice, as well as the benefits and downsides of bringing pre-FA02 assets into the IFA regime. The review also asks about potential transitional issues involved in such a change.

Goodwill and other relevant assets

In Finance Act 2015 the IFA regime was amended to deny relief for ‘relevant assets’, which includes goodwill and other related assets such as customer information and unregistered marks. The IFA regime now only gives a deduction at the time of disposal for these assets. Businesses have said that this restriction makes the UK system less generous than other countries, as well as introducing an artificial boundary between these types of intangibles which may not reflect accounting treatment.

The Government has asked for examples of both the positive and negative impacts of the 2015 changes. It has also invited suggestions on how the negative aspects of the regime could be changed without excessive cost to the Exchequer.

The impact of the regime’s de-grouping rules on mergers and acquisitions

The IFA regime provides for a ‘degrouping charge’ to be imposed where assets are transferred intra-group and then a company leaves the group within six years. This aims to prevent certain tax planning arrangements and is similar to rules in the capital gains regime. In 2011, rules were introduced to exempt the capital gains degrouping charge in certain cases where the Substantial Shareholding Exemption (SSE) applies, but these rules do not apply to the IFA regime. This has led to businesses claiming that the IFA degrouping charge is onerous compared to other types of asset.

The review asks about the extent that the IFA degrouping charge causes difficulties with M&A transactions in practice, as well as asking how the charge could be modified to prevent these difficulties.

The use and competitiveness of the election for a 4 percent per annum fixed rate of relief

While the default position is to allow a deduction for amortisation in line with the accounting treatment, companies can also elect to claim a 4 percent per annum fixed rate of relief, which may be preferred when assets have a long or indefinite useful life. The Government is interested in understanding the circumstances in which companies would choose this treatment and whether the election is less competitive than that offered by other countries.

The consultation is open until 11 May 2018.

For further information please contact:

Iain Kerr

Connect with us


Want to do business with KPMG?


loading image Request for proposal