CH 10 - Intangible Fixed Assets

Question 1

What is defiend as ‘Intangible Fixed Asset’? (IFAs)

Answer 1

• intellectual property (patents, registered trademarks, designs or copyrights), and
• goodwill.

Question 2

What tax relief is available for amortisation of an IFA charged in the accounts, or the company can claim?

Answer 2

Tax relief is available for the amortisation of an IFA charged in the accounts, or the company can claim a straight-line deduction of 4% on cost.

Question 3

When goodwilll attracts tax relief and when not?
(3 rules)

Answer 3

1.
For goodwill or customer-related intangible assets, there is usually no such tax relief

2.
Tax relief will apply on goodwill acquired from 1 April 2019 as part of a business acquisition which also includes intellectual property.
Tax relief is calculated as 6.5% per annum × lower of;

• the cost of the goodwill or customer-related intangible asset; and
• six times the amount of the qualifying intellectual property.

3.
For IFAs other than goodwill or customer-related intangible assets, tax relief is available from 1 April 2002 onwards for the amortisation of the IFA charged in the accounts, or the company can claim a straight-line deduction of 4% on cost.

Question 4

What includes qualifying intellectual property?

Answer 4

• patents;
• registered designs; and
• copyright or design rights

Question 5

How disposal of IFAs is calculated?

Answer 5

Disposals of IFAs such as goodwill give rise to an income gain or loss calculated as

proceeds less tax written down value (TWDV).

Question 6

State period into which rollover relief is available to IFAs

Answer 6

Rollover relief is available where the proceeds are reinvested in other IFAs

in the period 12 months before to 36 months after the sale of the IFA.

The income gain taxable will always equal the tax relief given to date plus the sale proceeds not reinvested.