BIM51460 - Broadcasters: incidental costs

Incidental costs in making licence applications may be incurred not only in connection with the `cash bids' for TV and national radio licences but also in making applications for local radio and other broadcasting licences that do not involve `cash bids'.

The treatment of incidental costs will vary in each case but, in summary, they will be capital if :-

• the licence is (or would be, if obtained) a capital asset in the trade of the applicant and
• the costs are not incurred to renew an existing licence conferring broadly similar rights.

The licence: whether capital asset.

The licence to broadcast will normally be a capital asset in the broadcaster's hands. A broadcasting licence is not akin to an ordinary commercial contract. It is not an ordinary incident of management or marketing. The licence is a pre-requisite to broadcasting and defines the whole nature and shape of the broadcaster's trade, see BIM35530.

The treatment of the `cash bid' payments does not alter the character of the licence as an asset and does not determine the tax treatment of incidental costs.

If the applicant is not seeking to preserve existing broadcasting rights the treatment of the incidental costs follows the treatment of the underlying asset and will normally be capital expenditure. This is the case even if the expenditure is abortive, see BIM35325.

New rights or existing rights: renewal of existing rights: application costs.

For guidance on whether or not an intangible asset is an existing asset or a new asset for the purposes of the intangible assets regime, please see the guidance at CIRD10140 onwards.

The corporate intangibles rules apply to companies holding intangible assets which they created or acquired from an unrelated party after 31 March 2002 (see BIM35501). The guidance which follows on this page applies only to expenditure which is not within the corporate intangibles rules.

We accept that on the renewal of a licence the expenditure is to maintain the existing business structure and is revenue expenditure. This is the case even if the application is unsuccessful. See BIM35540.

If the application fails, no relief should be given for outlay such as legal advice about the prospects of overturning the decision, etc. Also, it may be appropriate to refuse a deduction if there have been any significant changes, such as to the geographical area covered.