Budget 2018: Reform of intangible fixed assets

traffic cones u-turn
Share this content

David O’Keeffe has two cheers for changes to the intangible fixed assets (IFA) regime proposed in the Budget but wants to see the draft law before giving a final hurrah.

In early 2018 the government consulted on possible changes to the IFA regime (CTA 2009, Part 8). The consultation document suggested changes in a number of areas, but the Budget announcement only covers two of those areas.

Acquired goodwill

The IFA regime was amended in 2015 to deny relief to ‘relevant assets’, including goodwill and related assets. One of the intentions behind that change was to remove a perceived incentive to structure acquisitions as a trade and asset (including goodwill) deal, rather than a sale of shares. The trade and assets deal would then lead to a tax deduction for the cost of the goodwill in the acquisition.

There will be a partial reinstatement of relief for acquired goodwill in the acquisition of a business, although the details of how this will work are still unclear. The draft Finance Bill and tax impact note (TIIN) is due to be published today (7 November) and should provide us with more information on just how ‘partial’ this reinstatement will be together with a commencement date.

On the whole, this is good news for UK business investment.

De-grouping rules

Intra-group transfers have always been tax neutral under the IFA regime with the tax history of the asset transferred with it to the new owner in the group. To address the risk of avoidance there are detailed de-grouping provisions that impose an exit charge on the receiving company if it leaves the group within six years, whilst still holding the transferred assets, including intangible assets.

This is fine in principle, but the capital gains treatment applicable to real assets (as opposed to intangibles) has diverged as a result of the rules for the substantial shareholding exemption (SSE). In the case of real assets, the de-grouping charge can usually be exempted under SSE.

The Budget proposes making the de-grouping charge also exempt in the IFA regime, where it arises as a result of a transaction covered by SSE.

These changes will apply to de-groupings occurring on or after 7 November 2018.


Whilst these two proposed changes are very welcome, it is particularly disappointing that there is currently no suggestion that anything will be done to bring the pre-2002 intangible assets into the IFA regime.

About David O'Keeffe

I am an independent specialist adviser on the taxation of innovation, advising companies and other advisers on R&D tax relief, Patent Box and Creative Industry reliefs.

I have been involved with the UK’s R&D tax relief regimes since the initial consultations on the introduction of the SME relief.  In that time, I have developed an enviable level of knowledge of R&D tax relief both from a technical and a practical perspective. I established KPMG’s specialist R&D tax relief team and was a founder member of KPMG International’s Global R&D Tax Incentives Group and was a member of the Steering Group, with direct responsibility for the EMEA region.

I have provided input and consultation to many organisations and trade bodies. I was the only R&D tax specialist to have input to Sir James Dyson’s influential 2010 report "Ingenious Britain: Making the UK the leading high tech exporter in Europe" which is seen as the catalyst for reform of the UK’s R&D Tax Relief regimes. I have been a member of HMRC’s R&D Consultative Committee, a group with representatives from Government (HMRC, HMT and BIS) as well as industry, advisers and professional bodies, since its inception. I sit on CIOT’s CT technical Sub-Committee and chair the R&D Working Group of that sub-committee.

I was involved with the consultation process leading to the introduction in 2013 of the UK’s patent box regime. Since then I have helped his clients assess the merits of making a patent box election and then, where appropriate, to claim the benefit of the relief. More recently, I have actively contributed to the consultations around the design of the changes to the UK’s patent box to make it compliant with the OECD’s nexus requirements.

Formerly a Tax Partner with KPMG LLP (UK), I retired in 2011 to establish Aiglon Consulting.


Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.