CIRD44065 - Intangible assets: Restrictions for goodwill and relevant assets: Summary of when the restrictions apply

Structure of CTA09/CHAPTER15A

The overall structure of CTA09/CHAPTER15A ‘Debits in respect of goodwill and certain other assets’ is to allow relief for the cost of ‘relevant assets’ at a fixed rate of 6.5% under Chapter 3 unless a restriction applies. As explained at CIRD44000, these rules should be read within the framework and context of the wider CTA09/PART8 provisions. These rules therefore only apply to relevant assets that are within the scope of the CTA09/PART8 rules.

What restrictions can apply?

CTA09/CHAPTER15A restrictions will apply in relation to relevant assets that are:

  • Pre-FA 2019 assets
  • Acquired other than as part of a business acquisition
  • Acquired as part of a business acquisition but not together with qualifying IP
  • Acquired at a cost exceeding 6 times the value of the qualifying IP assets acquired
  • Acquired from a related individual or firm

Further details of the nature of restrictions are provided below.

CTA09/S879B

Requirement to write down at a fixed rate

CTA09/S879B(2) deems the company to have made a fixed rate election so that any debit relief computed under CTA09/PART8/CHAPTER 3 is computed by reference to CTA09/S731. But note the rate of 4% is adjusted to 6.5% by CTA09/S879B(3).

Identifying whether and what restriction applies

CTA09/PART8/CHAPTER15A includes several different restrictions that could apply to relevant assets. More than one restriction can apply but where there is a full restriction the partial restriction rules cannot also apply. Where no restriction applies relief under Chapter 3 is given at a fixed rate of 6.5%.

It is therefore necessary to consider whether any of the restrictions apply before calculating the debit relief. A summary of the full and partial restrictions is as follows:

  • A full restriction for pre-FA 2019 relevant assets (see CIRD44075 onwards)
  • A full restriction where relevant assets are acquired and either no business or no qualifying IP is acquired (see CIRD44080)
  • A full restriction where a relevant asset is acquired from a related individual or firm where the third party acquisition condition is not met (see CIRD44083)
  • A partial restriction where the cost of the relevant assets acquired are more than 6 times the cost of qualifying IP assets (see CIRD44086)
  • A partial restriction in respect of certain acquisitions from a related individual or firm where the third party acquisition condition is met (see CIRD44090).

The nature of the full restriction is explained further on the next page (CIRD44070). The partial restriction rules are explained from CIRD44093 onwards. Note that the full and partial restrictions are applicable to debits arising under:

  • Chapter 3 - fixed rate debits
  • Chapter 4 - realisations
  • Chapter 15 - adjustments on change of accounting basis