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HMRC internal manual

Business Income Manual

Capital/revenue divide: intangible assets: expenditure developing a brand name

Expenditure incurred on advertising to establish a market share for a new product or brand may be capital. An asset of this type is normally developed from scratch in-house although it may occasionally be built up from the acquisition of a struggling brand name or the rights in an invention.

See, however, BIM35501 for the Corporation Tax intangible fixed assets legislation, which may require the accounting entries in respect of brand names to be followed in computations of income for Corporation Tax, even if those entries are of a capital nature.

Where the intangible assets legislation does not apply, in deciding whether or not such expenditure is capital the following factors will be relevant:

  1. Whether the expenditure creates an asset of a capital nature.
  2. The length of time the advantage is likely to endure.
  3. The use of the asset in the context of the particular trade.
  4. The treatment of the expenditure in the taxpayer’s accounts.
  5. No one factor is likely to be decisive. You are likely to have a stronger case where:



  1. The product is one that does not vary over time.
  2. The maintenance of quality is not problematical.
  3. The business is one where customers tend to show brand loyalty that persists over substantial periods.
  4. The brand is not one of a portfolio where the decline of established brands and the creation of others is a continuing process.
  5. The brand has a clear legal status which protects it from being copied or imitated.
  6. The expenditure has not been charged to revenue in the accounts.

Generally there is unlikely to be a strong case for making a capital argument because the courts have been reluctant to accept that expenditure is capital where no tangible asset has been created. The name itself might be an asset or goodwill may have been created or enhanced. But the reality is often that if anything is created it is transitory and not sufficiently durable to be regarded as capital. This recognises that consumers are often fickle and can change allegiance relatively quickly.