Relief restricted for companies holding intangible assets through a partnership

Wed 25 Nov 2015

Greater “clarity” is being given to the intangible tax regime to make it clear that it is not possible to convert assets which do not qualify for tax relief under the regime in to assets that do, simply by transferring ownership of those from a corporate partner in to a partnership.

Whilst a partnership is not itself a separate legal entity, it must nevertheless compute its own taxable profits as if it were an entity separate from its partners. The taxable profits of the partnership are then allocated to corporate partners in determining the latter’s’ corporation tax liability.  Changes are being made to the intangibles tax regime (contained in part 8 of CTA 2009) to make it clear that it is not possible to generate tax relief under the intangibles tax regime by transferring non-qualifying intangibles (e.g. pre 1 April 2002 intangibles that do not benefit from the tax relief afforded under part 8 of CTA 2009) from a corporate partner in to the partnership.

These changes are aimed at arrangements whereby companies have transferred assets into such bodies in order to bring these into the intangible tax regime  despite there being no change in the underlying economic ownership of the intangibles.

Although these changes apply to transfers of assets that take place on or after
25 November 2015, they are also retrospective, with the effect that no relief will be available to companies for any amortisation charged in the accounts on or after
25 November 2015 in respect of such assets irrespective of when they were transferred or acquired.

Thus, for any accounting period straddling 25 November 2015, this will necessitate an apportionment of the accounting period so that the new rules will apply only to amounts that accrue after that date.

For more information contact Andrew Ross