INSIGHTS: February 2012
Shared experience.
The UK taxation of Intellectual Property
(IP) - The intangible assets regime
In 2002 the UK taxation regime for
Intellectual Property was reformed.
Broadly the regime applies to IP
acquired or created after 31 March
2002.
Intellectual Property under the
Intangible Assets Regime includes, but
is not limited to:
• Goodwill
• Patents and Trade Marks
• Plant Breeder’s Rights
• Copyright and Design Rights
(including over computer
programmes and databases)
• Information or techniques having
economic value that is not
generally available to the world at
large
• Licences or rights in respect of the
above
There are various excluded and
partially excluded assets and the
rules are complex.
The 2002 regime applies to:
• Intangible assets acquired from
unconnected third parties after 31
March 2002
• Internally generated assets on
which expenditure commenced
after 31 March 2002
Taxation Treatment:
• Broadly the accounting gains and
losses are charged to tax in the
year in which they are accounted
for.
• Accounts not drawn up according
to Generally Accepted Accounting
Practice (GAAP) are adjusted for to
GAAP for tax purposes.
• The Intangible Asset is taxed or
relieved as part of the business
profits for that part of the business
which it is held, e.g. trade, property
business, mines, transport
undertaking etc, and taxed as part
of the specific rules for that income
stream (the UK has different
taxation rules for different kinds of
income).
• For any expenditure where there
are specific taxation rules, then
these override the IP rules, e.g. the
taxation treatment of bad debts,
grants, non-allowable expenditure,
late paid remuneration etc.
• Upward revaluations of IP are
taxable to the extent that previous
tax relief has been given.
• Negative Goodwill on a business
acquisition is taxable to the extent
it is recognised in the accounts and
attributable to IP.
• Instead of claiming relief for
accounts amortisation, taxpayers
may elect to amortise assets over
25 years for tax purposes at 4%
per annum.
• On the sale of an asset the
difference between the proceeds
and the tax book value is taxed or
relieved.
• Pre 31 March 2002 assets continue
to be taxed under the previous
regime, largely as Capital Assets on
disposal and with no amortisation
allowances.
Other Points:
• There are specific rules to allow
Double Taxation Relief against
specific IP income streams which
could otherwise be lost due to the
overall result of the company being
insufficient to allow full offset.
• Controlled Foreign Companies are
within the IP regime, subject to
detailed rules.
• There is a specific Roll Over Relief
Regime where IP assets are sold
and new IP assets acquired, similar
to the Capital Gains Tax rules for
Roll Over Relief.
• There is a Group Tax regime for IP
assets held within 75% corporation
tax groups, which mirrors the
other UK group tax rules, including
in inter-company transfers,
companies leaving groups and so
on.
• There are anti-avoidance rules for
transfers between related parties
that are not 75% group companies,
which put in effect a Market Value
charge on transfer.
The Proposed Patent Box Regime
• Plans to allow the taxation of the
income from Patents at 10%
• To be enacted summer of 2012
• Effective from 1 April 2013
• Phased in over 5 years until
2017/2018
• In respect of IP or an exclusive
licence to hold the IP
• Applies to UK or EU patents
• The company or group must
develop or significantly develop
the IP – the aim is to encourage
high value jobs in the UK
• Election is in to the regime, it is not
mandatory
• Requires detailed calculation and
record keeping, the proposed rules
are not simple.
If you have any questions regarding
UK taxation of IP please contact us
[email protected].
This document is prepared to keep readers abreast of current developments, but is not intended to be a comprehensive statement of law or current practice.
Professional advice should be taken in light of your personal circumstances before any action is taken or refrained from. No liability is accepted for the opinions it
contains, or for any errors or omissions. Buzzacott LLP is a limited liability partnership and is registered in England and Wales with registered number 0C329687.
Registered office is 130 Wood Street, London, EC2V 6DL. © Buzzacott LLP February 2012. All rights reserved.