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CT relief on amortisation

CT relief on amortisation

Didn't find your answer?

Looking at a file but disagree with my tax manager who has added back amortisation.

Client incorporated August 2013. Goodwill included and being amortised.

I reckon it's a pre July 2015 purchase so we don't need to add back.

Please confirm that I'm correct and my colleague isn't!

Replies (7)

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By Anonymous.
24th Jun 2020 12:07

I think it's covered in the HMRC manuals but I'm out at the moment and so haven't time to find the link.

Do you have any reference books in the office you could use?

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By Dib
24th Jun 2020 13:33

The significance of July 2015 (8th July to be precise) is that the amortisation is allowable if the asset was acquired from a third party before that date. Assuming it was a connected party transaction (which it seems to be) then the date you should be interested in is 3 December 2014. Amortisation on intangibles acquired from related individuals or partnerships before 3 December 2014 is allowable. Your client seems to fit into this category.

The legislation is a bit garbled as it has been hacked around so much with the various changes to tax relief for intangibles but it's now hidden in s33 F(No2)A 2015 which omits s26 FA 2015 where it was originally and then allows the amortisation in s33(10).

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By Tim Vane
24th Jun 2020 13:32

The likelihood is you are right. Presumably everybody is happy with the estimate of the lifetime of the goodwill (i.e. being reasonably ascertainable and more than 5 years) so beyond that if it's in the accounts it should be allowable.

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Psycho
By Wilson Philips
24th Jun 2020 14:03

There is potentially one very important piece of information missing.

You say the client incorporated in 2013 from which I infer an existing business was transferred to the company from a related party. If so, when did that business commence?

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Replying to Wilson Philips:
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By Dib
24th Jun 2020 14:11

Yes, sorry - made a bit of an assumption there!

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Replying to Wilson Philips:
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By HeavyMetalMike
24th Jun 2020 14:12

Top Marks, Wilson. Did the sole trader commence before or after April 2002. I didn't mention it because I forgot about that significance.
I'll ask the client.

Thank you.

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Replying to HeavyMetalMike:
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By HeavyMetalMike
24th Jun 2020 14:15

30 years!. DOH.
It's was a sole trader before April 2002 so no tax relief......

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