The Government has listened to concerns raised over the competitiveness of the tax rules for intangibles.
Following a review earlier in the year, the Government has announced two changes to the rules taxing intangible fixed assets which will be of interest to companies undertaking merger and acquisition (M&A) activity and multinational groups considering transferring intangible assets to the UK.
Firstly, provisions will be introduced with effect from April 2019 to introduce tax relief for goodwill arising on the acquisition of businesses with ‘eligible’ intellectual property. There will be an opportunity to participate in a short consultation on the details of the legislation before it is included in the Finance Bill. This is a welcome partial reversal of the removal of relief for goodwill in 2015. Businesses will need to pay close attention to the scope and timing of the relief.
Secondly, the de-grouping charge rules for post-2002 intangible assets are being aligned more closely to the equivalent rules for pre-2002 assets. For de-grouping events occurring on or after 7 November 2018, no de-grouping charge will arise on share disposals that qualify for the Substantial Shareholding Exemption. This is a welcome change for companies intending to dispose of business divisions. The change will remove a long-standing and arbitrary difference in the tax treatment of such disposals which was dependant on when the business in question commenced and the age of the relevant assets.