Section 70: Intangible Fixed Assets and Goodwill
Summary
1.Section 70 introduces legislation to confirm the tax treatment of goodwill provided for by the corporate intangible fixed assets regime (‘the regime’) at Part 8 of the Corporation Tax Act 2009 (formerly Schedule 29 to the Finance Act 2002)
2.Section 70 confirms that for the purposes of the regime, goodwill includes ‘internally-generated goodwill’, and that all goodwill is created in the course of the carrying on of a business and is subject to rules determining whether goodwill is treated as being created before or after 1 April 2002.
3.Corresponding amendments are made to the rules governing whether assets representing non-qualifying expenditure are treated as being created before or on or after 1 April 2002.
Details of the Section
4.Subsection (2) provides for an amendment to section 712(2) of the Corporation Tax Act 2009 (CTA) to confirm that the meaning of an ‘intangible asset’ also includes an internally-generated asset.
5.Subsection (3) provides for a new subsection to be inserted in section 715 of CTA. New section 715(4) confirms that for the purposes of the regime all goodwill is created in the course of carrying on a business. This confirms, for example, that no goodwill is created by the acquisition of a business or by the accounting recognition/capitalisation of goodwill.
6.Subsection (4) provides for consequential amendments to section 883 of CTA so that the interface with and references to other sections being amended operate correctly.
7.Subsection (5) provides for amendments to section 884 of CTA to confirm that goodwill is treated as created before 1 April 2002 if the business was carried on at any time before that date by the company or a related party, and otherwise is treated as created on or after 1 April 2002.
8.Subsection (6) provides for amendments to section 885 of CTA to confirm that an asset is treated as created before 1 April 2002 if the asset was held at any time before that date by the company or a related party and it represents expenditure that under the law as it stood before 1 April 2002 is not qualifying expenditure for the purposes of any allowance under the Capital Allowances Act 2001. In all other cases, the asset is treated as created on or after 1 April 2002.
9.Subsection (7) provides for the amendments made by the section to have effect in relation to accounting periods beginning on or after 22 April 2009, and that in relation to those accounting periods the amendments are treated as always having had effect. The amendments apply for the purposes of calculating the future tax consequences of past transactions.
10.Subsection (8) provides that where an accounting period starts before 22 April 2009 and ends on or after that date, then for the purpose of applying the amendments, the period from 22 April 2009 to the end of the current accounting period will be treated as a separate notional accounting period.
Background Note
11.The corporate intangible fixed assets regime was originally introduced as Schedule 29 to the Finance Act 2002, following consultation, and is now contained in Part 8 of the Corporation Tax Act 2009. It deals with the corporation tax treatment of intangible fixed assets such as patents, trademarks and design rights as well as the tax treatment of goodwill.
12.Currently, some companies are taking a contrary interpretation to HM Revenue & Customs (HMRC) of certain rules governing the treatment of goodwill. The purpose of this section is to confirm that the rules governing the treatment of goodwill operate as intended, and in the way HMRC considers that they do already.
13.The section confirms that for the purposes of the corporate intangible asset regime goodwill includes ‘internally-generated’ goodwill, and that all goodwill is created in the course of the carrying on of a business and is subject to rules determining whether goodwill is treated as being created before or on or after 1 April 2002.
14.The legislation applies for the purposes of accounting periods beginning on or after 22 April 2009, and the part of any accounting period straddling this date which falls on or after 22 April. This includes for the purposes of calculating the future tax consequences of past transactions.
