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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Broadcasters: unincorporated broadcasters: tax treatment of incidental costs of obtaining a broadcasting licence

The guidance below does not apply to companies acquiring or selling licences after 31 March 2002 as such expenditure is covered by the intangible assets regime for companies. See the Corporate Intangibles Research & Development (CIRD) Manual.

For guidance on whether or not an intangible asset is an existing asset or a new asset for the purposes of the intangible assets regime, please see the guidance at CIRD10140 onwards.

For an overview of the UK broadcasting licences issued by the Office of Communication (Ofcom), see BIM51455. For the tax treatment for an unincorporated broadcaster of the fees incurred in obtaining a broadcasting licence, see BIM51460. The guidance below considers the tax treatment of incidental costs associated with broadcasting licences.

Incidental costs of broadcasting licence applications

Incidental costs include application fees, amendment fees and transfer fees (see BIM51460) as well as associated professional costs.

The tax treatment of these incidental costs will vary in each case but, in summary, they will be capital expenses and so not deductible from trading profits if:

  • the licence is (or would be, if obtained) a capital asset in the trade of the applicant, and
  • the costs are not incurred to renew an existing licence conferring broadly similar rights.

The licence: whether capital asset

The licence to broadcast will normally be a capital asset in the broadcaster’s hands. A broadcasting licence is not akin to an ordinary commercial contract. It is not an ordinary incident of management or marketing. The licence is a pre-requisite to broadcasting and defines the whole nature and shape of the broadcaster’s trade, see BIM35530.

The treatment of the annual payments (see BIM51460) does not alter the character of the licence as an asset and does not determine the tax treatment of incidental costs.

If the applicant is not seeking to preserve existing broadcasting rights the treatment of the incidental costs follows the treatment of the underlying asset and will normally be capital expenditure. This is the case even if the expenditure is abortive, see BIM35325. This means the broadcaster is not able to obtain a revenue deduction for the expenditure.

New rights or existing rights: renewal of existing rights: application costs

You should accept that, on the renewal of a licence, the expenditure is to maintain the existing business structure and is revenue expenditure. This is the case even if the application is unsuccessful. See BIM35540.

If the application fails, no relief should be given for outlay such as legal advice about the prospects of overturning the decision, etc. Also, it may be appropriate to refuse a deduction if there have been any significant changes, such as to the geographical area covered.