The Finance Bill provides for a new scheme of tax relief for capital expenditure incurred by companies on the provision of intangible assets for the purpose of a trade. This new relief will consolidate existing reliefs for certain intangibles (such as patent rights and know-how), together with providing relief for the first time for other intangibles (such as trade marks and copyright).
In summary, the scheme provides for capital allowances against taxable income on capital expenditure incurred by companies on the provision of intangible assets for the purposes of a trade. The new scheme applies to expenditure incurred by a company after 7 May 2009.
The scheme applies to intangible assets which are recognised as such under generally accepted accounting practice and which are included in the specified categories listed in the new section, including patents, trade marks, copyright, know-how, goodwill.
Allowances provided under the scheme will reflect the standard accounting treatment of intangible assets. However, companies can opt instead for a fixed write-down period of 15 years at a rate of 7% per annum and 2% in the final year.
Activities which consist of the managing, developing or exploiting of a specified intangible asset and carried on by a company as part of a trade are to be treated as a separate trade and income from such activity is to be assessed separately.
There will be no claw-back of allowances where an intangible asset is disposed of more than 15 years after the beginning of the accounting period in which the asset was first provided, provided that the disposal does not result in a connected company claiming allowances in respect of capital expenditure on the asset.
There are specific provisions for group companies.
The following is the interaction of the new relief with existing reliefs:
Computer Software
The allowances currently available for capital expenditure on the provision of computer software are being retained. The new scheme does not apply to computer software.
Patent Rights and Know-How
As patent rights and know-how are being included in the new scheme, the existing reliefs for capital expenditure on patent rights and know-how are being discontinued for companies, but with provision for companies to opt for these reliefs for a further 2 year period.
Interaction with Stamp Duty
The definition of ''intellectual property'' in section 101 of the Stamp Duties Consolidation Act 1999 is being changed to broadly align the definition of ''intellectual property'' in the Stamp Duty code with a similar definition in the new relief above. The change applies to instruments executed after 7 May 2009.