In July 2015, HMRC tightened the rules for companies getting tax relief on goodwill. As sometimes happens when HMRC introduce new rules, there are unforeseen negative impacts where they hadn’t intended and so, with effect from 1 April 2019 the rules have changed for some acquisitions of goodwill and relevant assets.
Relief is now available on purchases made after 1 April 2019 if the:
- Goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property;
- Business is liable to corporation tax
- Relevant assets (including goodwill) are included in the company accounts.
Tax relief available – relief is a fixed rate of 6.5% a year based on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.
Relief is given yearly until the limit is reached.
Claims must be included in the company’s corporation tax return.
Restrictions will still apply to goodwill and relevant assets purchased:
- Without qualifying IP
- Without a business
- From a related individual, firm or partnership which are internally-generated
- From a related party that has been subject to a previous restriction.
More information can be found at HMRC’s website using the following link www.gov.uk/guidance/corporation-tax-relief-on-goodwill-and-relevant-assets.
If you have any questions or would like to discuss this in more detail, please get in touch.
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