Writing off intangible asset - can I claim capital allowances

Writing off intangible asset - can I claim...

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I have a 10 year franchise fee in my intangible assets which I have been amortising over the 10 years.  Unfortunately I have had to terminate the franchise arrangement early (but don't get any of the fee refunded).  I'm not sure how to write this off through the P&L and can I claim the outstanding balance in capital allowances for corporation tax purposes?  Any help much appreciated or if you cam point me in the right direction for the guidelines?

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By newmoon
20th May 2014 10:51

Have a look here http://www.hmrc.gov.uk/manuals/bimmanual/bim57600.htm

I hope this is helpful.

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By Assistant
20th May 2014 14:00

Thanks but...

I've had a read through there (and all associated links) but I can't see any guidance on what happens when the asset needs to be written off.

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By Exector
20th May 2014 16:43

Corporate Intangible

On the basis of a 10 year life & not all w/off yet, and in the hands of a company, appears to me that the franchise will probably fall to be treated as a Corporate Intangible. The previous post, although immediately linking to BIM & a pre- Corporates Intangibles regime does have links to the relevant HMRC guidance on Corporate intangibles, but basics are is t/a an effectively income item, allowable write off in P&L over the expected commercial life. Any disposal of the asset is brought in as an income receipt, less any balance of acqn cost not previously w/o to P&L. In this case Nil receipt & bal of P&L w/off remains in P&L & not adjusted for CT purposes. No CAs of course!

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Replying to Duggimon:
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By carnel81
22nd May 2014 12:25

If he dosen't get any refund for the residual value, wouldn't this trigger a disposal loss for the balancing figure to P&L? Why wouldn't this be allowed for CT calculation?

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By Assistant
20th May 2014 19:20

Ah - thank you!
That makes sense! Actually when I think about it, that's how I decided to treat the amortisation in the first place. Although I have the 'asset' sitting in my BS I post 1/10th of value each year to P&L and I don't disallow this this. So I just post the remaining balance to P&L in the year I terminated the agreement?

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Replying to NYB:
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By Exector
21st May 2014 09:28

Yes

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By Exector
22nd May 2014 12:35

@ Carnel Think you are perhaps misunderstanding

As the asset has been effectively disposed of/written off, all of the balance of the cost will be debited to the P&L in the AP of write-off. This will reduce the net profit. What I am saying is that this  isan allowable P&L debit for CT purposes where a Corporate Intangible is involved, so it is not ADDED BACK in the CT profit computation

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