CIRD10115 - Intangible assets: introduction: link with accountancy
The corporate intangible assets regime links the tax treatment to that applied in the accounts of the company in question. As a result, the tax treatment should reflect more closely the commercial realities of the situation, and so help avoid the distortion of commercial decisions by tax considerations.
However, there is not necessarily a straight read across from the entries in the profit and loss account to the tax computation. In broad terms intangible assets that were held by a company prior to 1 April 2002 generally remain outside the regime, and so accounting entries relating to these assets are not followed for corporation tax. In addition, adjustments are necessary where, for example, reinvestment relief has reduced the tax written down value of assets within the CTA09 rules.
Subject to such exclusions and adjustments the corporate intangible assets regime identifies the relevant entries in a company’s accounts and brings them into an exclusively income regime for corporation tax purposes. Under these rules, sums written off intangible fixed assets are usually deductible so long as their treatment is in accordance with GAAP. All receipts from the assets, including those that were capital under previous law, are revenue items for corporation tax purposes. In addition, where assets that have previously been written down are revalued upwards, past tax deductions are recovered.
The way the accounts entries are used to arrive at the tax position is dealt with in the computations section starting at CIRD12000, while our general approach to challenging accountancy judgements on the grounds that they are not in accordance with GAAP is dealt with at CIRD30130 andCIRD30140. A simple computational example is shown at CIRD10116.
4% per annum fixed rate amortisation election
An exception the general rule that the accounting entries are the starting point for arriving at the tax position is where there is an election for 4% p.a. fixed rate amortisation. This is dealt with at CIRD12905 onwards.
