Key changes to the intangible asset regime came into force with the Finance Act 2020, concerning which assets are available for corporation tax relief. In this short blog, we summarise the new regulations.

Intangible Fixed Assets

Let’s start by explaining what we mean by Intangible Fixed Assets (IFAs) – these are assets that are used over a long period of time by a company, but they are not physical, they’re intangible. Examples include copyrights, patents, trademarks and intellectual property.

Assets are classed as either pre-April 2002 or post April-2002, for tax purposes.

Assets pre-April 2002

Intangible fixed assets created before 1 April 2002 have traditionally been treated as capital assets for Corporation Tax purposes, with tax relief being restricted. For example, companies have been prevented from claiming relief on assets such as historic intellectual property rights.

Assets post-April 2002

Assets created on or after 1 April 2002 fall within the IFA Regime. The tax treatment for these assets follows the accounting treatment, and relief is available in the form of writing off the cost over a period of time. These rules also apply if the asset was acquired by an unrelated party to the company on or after 1 April 2002.

Budget changes to IFAs - take note

As of 1 July 2020, corporate intangible assets are now relieved and taxed under a single regime for acquisitions - the IFA Regime - subject to certain transitional and anti-avoidance provisions.

The introduction of this amendment means that, for IFAs created before 1 April 2002, Corporation Tax relief may be available for the cost of acquiring these (where previously they would have fallen outwith the scope of the IFA regime), as long as the company acquires them after 1 July 2020.

Assets from related parties

This widened scope to the IFA regime is particularly significant for companies acquiring assets from related parties, such as companies within the same group structure. Under these new rules, companies may now be able to claim corporation tax relief for pre-1 April 2002 IFAs acquired from related parties from 1 July 2020.

Action to take

Now is a good time to review your IFA asset base fully and the associated acquisition dates - if you have any assets that fall within this new scope, we’re here to help you with this.

Get in touch

If you are aware of intangible fixed assets within your business which may be impacted by the changes introduced by the Finance Act 2020, please contact me at John.McAuslin@jcca.co.uk, or your usual Johnston Carmichael adviser.