Intangible asset rollover relief claim

If your company sells a chargeable intangible fixed asset, it can give rise to a gain which is subject to corporation tax. However, if further intangible assets are bought, rollover relief for the gain can be claimed.

Intangibles

Intangible fixed assets (IFAs) are those that are not physical, but have value nonetheless. Examples include goodwill, patents, rights and licences. They are subject to their own special corporation tax regime when they are bought or sold by companies.

Reinvestment

A gain can be deferred if further IFAs are purchased in the period starting one year before, and ending three years after the date of sale of the old IFA. This works by rolling over the gain into the new asset which reduces its cost for tax purposes. The amount of rollover relief depends on how much is spent on the new assets. The entire gain can be rolled over where all the proceeds from the sale of the old asset are reinvested. However, if only some of the proceeds are reinvested, only a partial claim can be made.

Example

Acom Ltd sold goodwill in April 2022 for £200,000, having built it up internally. It used £250,000 to purchase a licence in April 2023. It could claim reinvestment relief in full, reducing the allowable cost in respect of the licence to £50,000 which would be used in a future sale.

Procedure

A claim must include details of both the old and new asset, and a calculation of the amount due. A claim must be made within four years of the end of the accounting period to which the claim relates.