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HMRC internal manual

Corporate Intangibles Research and Development Manual

Intangible assets: FA15 and F2A15 rules for goodwill and relevant assets: F2A15 rules for goodwill and relevant asset acquired on or after 8 July 2015 – F2A15 changes


Background to the F2A15 changes

In accounting terms, goodwill reflects the difference between the cost of an investment in another business and the values attributed to the individual assets and liabilities acquired.

The practical effect of allowing tax deductions for goodwill was that a company could claim corporation tax relief for the cost of its investment in another business; but only if it was structured as a business acquisition.  The tax benefit was not available to companies who invest in other businesses by acquiring shares.  Tax could therefore be one of the drivers that influenced how a particular business acquisition or merger was structured.

The purpose of the F2A15 changes is to restrict when and how debit relief for goodwill and goodwill type assets under CTA09/PART 8 is given, for example, by withdrawing any entitlement to relief under Chapter 3. This will only affect acquisitions occurring on or after 8 July 2015.  Relief will continue to be allowed for the cost of the intangible asset under Chapter 4 (realisations).

Points to note

The new rules introduced on 8 July 2015 extend the rules introduced on 3 December 2014 in respect of related party incorporations to all acquisitions occurring on or after 8 July 2015.  The practical effect of the F2A15 and previous FA15 change is that:

  • For all acquisitions that took place before 3 December 2014 amortisation etc. relief continues to be available after 3 December 2014 provided the goodwill etc. was acquired before that date.
  • Incorporations of related party businesses will not be entitled to amortisation etc. relief for goodwill etc. acquired on or after 3 December 2014.
  • All acquisitions that take place on or after 8 July 2015, including acquisitions from non-related parties, cannot claim amortisation relief for goodwill etc.

The new rules only apply to transfers of goodwill and assets typically associated with goodwill (including unregistered trade marks).  The new rules do not affect transfers of other types of intellectual property.

Tax-neutral transfers of assets subject to the rules that existed before 8 July 2015 can continue to claim relief under those rules even if the tax-neutral transfer occurred after this date.

For more details on the changes introduced from 3 December 2014 see CIRD44400.