The new regime modernises the corporate tax base, providing
relief for the cost of acquiring intangible assets where none had
previously been available.
The new regime will provide for companies to obtain
tax relief for the cost of intangible assets (including goodwill
and intellectual property), in most cases based on the amortisation
reflected in their accounts. There is also provision for tax
allowances at a fixed rate of 4% per annum to provide for relief in
the case of indefinite or longer life assets.
The new rules will apply to expenditure on the creation,
acquisition and enhancement of intangible assets (including
abortive expenditure), as well as expenditure on their preservation
and maintenance. Relief under the new regime will therefore be
available for the cost of internal development, as well as
acquisition, of intangible assets.
Payments for the use of intangibles will also be within the
scope of the new regime. The charge on income rules will no longer
apply to royalty payments and relief will be given in line with the
accounting treatment. The taxation of royalty receipts will also
follow the accounts.
Disposals of intangible assets will be taxed on an income basis
under the new regime. A roll-over relief will apply where disposal
proceeds are reinvested in new intangible assets within the
regime.
Intangible assets that companies hold at commencement will
generally be taxed under current law, subject to the changes in
roll-over relief described below.
Capital gains on the disposal of intangible assets held at
commencement will qualify, where appropriate, for roll-over relief
under the new arrangements for intangible assets.
Disposals by companies of goodwill and agricultural and fishing
quotas held at commencement will not qualify for capital gains
roll-over relief, except where reinvestment under the capital gains
rules has taken place before 1st April 2002 and within the 12 month
period prior to the disposal.
Purchases of goodwill and quotas after commencement will no
longer be qualifying acquisitions for the purpose of capital gains
roll-over relief.
