Budget 2020: IP rules on intangible fixed assets clarified

The Chancellor used his first Budget to make further changes to the corporate intangible fixed assets (IFA) regime, bringing older well-established intellectual property rights within its scope to create a unified approach

The previous 2018 Budget included changes such as a targeted relief for goodwill and closer alignment of the de-grouping rules for corporate groups.

Now Rishi Sunak has announced the government will remove a restriction that exists in relation to pre-FA 2002 intangible assets (those created before 1 April 2002).

This means that corporation tax relief will be available for the cost of acquiring these assets in circumstances where it previously was not,  and that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.

Transitional rules will be introduced to protect companies holding intangible assets that are within the charge to corporation tax immediately before 1 July 2020 including those companies with accrued gains or losses on intangible assets dealt with under the capital gains rules.

These transitional rules are extended and may apply to intangible assets held by any company within the charge corporation tax in relation to chargeable intangible assets held at any time between 11 March 2020 to 30 June 2020.


The corporation tax rules that deal with intangible assets are contained in Part 8 Corporation Tax Act 2009 (CTA 2009). The Part 8 CTA 2009 rules only apply to intangible assets that are created on or after 1 April 2002 or to intangible assets acquired from an unrelated party on or after 1 April 2002 – those that do not meet this condition are referred to as ‘pre-FA 2002 assets’.

Pre-FA 2002 assets are normally dealt with under the corporate capital gains rules within the Taxation of Chargeable Gains Act 2002 (TCGA 1992) or under Part 9 of CTA 2009.

Legislation will be introduced in Finance Bill 2020 to amend Part 8 CTA 2009 to allow companies who acquire pre-FA 2002 intangible assets from related parties from 1 July 2020 to be brought within Part 8 CTA 2009.

The general rule in Chapter 16 of Part 8 CTA 2009 that prevents pre-FA 2002 assets acquired from related parties coming within Part 8 CTA 2009 will be amended. For intangible assets not within the charge to corporation tax prior to acquisition there will be no need to consider when the intangible asset was created or whether an intangible asset acquired from a related party was a pre-FA 2002 asset in the related party’s hands.

The tax treatment for pre-FA 2002 assets already within the charge to corporation tax prior to 1 July 2020 will be preserved.

Transitional rules will also be introduced to counter avoidance between related parties where a pre-FA 2002 asset is acquired from a related party on or after 1 July 2020 (including a licence in respect of a pre-FA 2002).

The transitional related party rules will be extended to include related party acquisitions of assets from a person who is not a company in relation to assets created before 1 April 2002. These transitional rules will limit the amount of debit relief under Chapter 3 and 15 of Part 8 CTA 2009 by deducting the market value of the asset at the date of acquisition from any costs incurred on acquisition.

The acquisition costs not relieved under Chapter 3 and 15 will instead be relieved on any subsequent realisation under Chapter 4 of Part 8 CTA 2009.

Treasury analysis indicates the move will see tax receipts dip by £5m in the current tax year, and by £185m in 2024/25.

An estimated 30,000 businesses own or transact in pre-FA 2002 intangible fixed assets, and around 1,000 businesses each year acquire pre-FA 2002 intangible fixed assets from related parties.

Chris Sanger, EY’s head of tax policy, said: ‘The Chancellor has addressed one of the bugbears of the taxation system, namely the existence of two different regimes to tax and relieve the income and costs of intangible assets. 

‘From 1 July this year, all corporate intangible assets will be relieved and taxed under a single regime, removing a significant complexity in the tax regime. 

‘This will bring with it some transitional rules, but it is good to see the Chancellor valuing simplicity such that he will spend what amounts to an average of about £100m per annum over the next five years.

‘This will make the UK more attractive and the costing takes into account the increase in investment into the UK as a result.’

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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