Back in February, the Government published a wide-ranging consultation paper canvassing possible reforms of the regimes under which intangible assets are taxed in the UK.
There has been little news since the consultation period ended but buried in the Budget Red Book are two proposals which have emerged from the consultation process.
- The first is a proposal to reintroduce some limited form of relief for the costs of acquired goodwill.
Those with not very long memories will recall that amortisation relief for the costs of acquired goodwill and customer related intangibles was effectively withdrawn in Finance Act 2015. That change created yet another area in which the UK rules departed from the accounting treatment and left the UK regime looking distinctly unattractive when compared with the equivalent regimes in other EU jurisdictions. There is no detail of the new proposal in the Red Book, but we are promised a consultation paper for new rules which are to take effect from April 2019.
- The second is a proposal to align degrouping charges under the intangible fixed asset regime which applies to post-2002 assets with the capital gains regime which applies to pre-2002 intangibles.
This looks like a sensible proposal. The lack of relief from degrouping charges under the post-2002 regime hampers many group reconstructions and reorganisations. We can only hope that this proposal will help smooth the way for what in any rational tax system ought to be broadly tax neutral transactions. Once again there is little detail in Budget papers. The announcement promises that the new rules will take effect from 7 November 2018, the day on which the draft legislation is due to be published.
These changes are likely to be welcomed. They will help smooth some of the rough edges in the current rules. But those who were hoping that the consultation process might produce more radical reform of the tax code in this area - such as the alignment of the rules that apply to post-2002 assets with those that apply to pre-2002 intangibles - look set to be disappointed.