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HMRC internal manual

Corporate Intangibles Research and Development Manual

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Core computational rules: taxable credits: revaluation of intangible assets: example

Calculation of taxable credit on revaluation: Example

Assume an intangible asset that has a fair value that can be determined by reference to an active market rket value was purchased for £1000 and amortised at £100 per annum. At the end of year 4 it had a carrying value of £600. It is then revalued to £1100 in the accounts and an accounting gain of £500 recognised.

As a result of a reinvestment relief claim (CIRD20000 onwards) its tax cost on acquisition was £800. The annual deductible debits have therefore been £80 (£800 / £1000 x £100) rather than £100. The tax written down value at the end of year 4 is £800 - [4 x £80 = £360] = £480.

The taxable credit on the revaluation is the lesser of:

  • the accounting gain adjusted in the ratio which the tax value of the asset bore to the accounting value immediately before the revaluation, and
  • the total debits deducted for previous periods.

That is the lesser of:

  • £500 x £480 / £600 = £400, and
  • 4 x £80 = £320.

So the taxable credit is £320. The balance of the uplift (£500 - £320 = £180) is disregarded.

See CIRD12790 for the computation of subsequent deductions for the amortisation or impairment of the asset.