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HMRC internal manual

Corporate Intangibles Research and Development Manual

HM Revenue & Customs
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Telecommunications licences and rights: how the legislation works: expenditure on acquisitions

When a taxpayer acquires a licence or right to which the rules apply the expenditure will be treated as a revenue item if:

  • it may be debited in calculating the profit or loss for accounting purposes,
  • this is in accordance with GAAP, and
  • this is how it has been debited in any statutory accounts of the taxpayer.


On 1 January 2001 Ancona Ltd acquires a wireless telegraphy licence in an auction for£20 million. In its statutory accounts it amortises the expenditure at £1 million ayear. Assume that this is in accordance with GAAP.

In the year ended 31 December 2001 £1 million will have been debited in calculating thecompany’s profit for accounting purposes. Therefore, Ancona Ltd will be treated as having incurred revenue expenditure of £1 million in the year ended 31 December 2001.

If Ancona Ltd is a trading company and the expenditure has been incurred wholly and exclusively for the purposes of its trade then it will be entitled to a deduction of £1million in computing its trading profits for the year ended 31 December 2001. For non-traders see CIRD70420.

Meaning of ‘acquisition’

For the purposes of FA00/SCH23, ‘acquisition’ also includes:

  • The extension of rights attached to an existing right.
  • The cancellation or restriction of derivative rights to which a right is subject.