CIRD10140 - Intangible assets: introduction: commencement of new regime: existing assets

The rules in FA02/SCH29 normally only apply to intangible fixed assets created or acquired by a company on or after 1 April 2002 (‘commencement date’).

It should be noted that the commencement date does not apply on the basis of a particular accounting period, but instead it applies on a basis of when an asset was acquired or created. The manual covers the question of how to decide when this is, starting at CIRD11500.

‘Grand-fathering’

For assets that were owned by the company (or by a related company) prior to the commencement date, there is a ‘grand-fathering’ regime that continues the existing treatment for these assets, although with changes to the position on rolling over gains. Assets grand-fathered in this way are known as existing assets.

CIRD10145 tells you where to look for guidance on the treatment of existing assets .

When do existing assets move to the new regime?

In general, once an existing asset in the hands of a company is sold after commencement date, it will come within the regime in the hands of the company acquiring it. But assets that are purchased from related parties stay outside the regime if the related party held the asset prior to the commencement date. Without this rule it would be a relatively straightforward matter for transactions to be entered into to obtain tax deductions under the new regime without any change in the ultimate economic ownership of the asset in question. The related party rules for this and other aspects are considered briefly later in this introductory section at CIRD10160.

Royalties in respect of existing assets, as well as those subject to Schedule 29, come within the new rules from 1 April 2002 (see CIRD10150).

In the particular cases of Lloyd’s syndicate capacity, and telecommunication rights and licences within FA00/SCH23, which were already taxed as income, the assets come into the new regime even if they are existing assets ( CIRD11740 and CIRD11750).

Deferral of gains on existing assets

Existing assets remain subject to the CG code on disposal, but where the disposal takes place on or after the commencement date, CG roll-over relief ceases to be available. This withdrawal of roll-over relief affects goodwill and certain types of fishing and agricultural quota.

Instead, reinvestment relief under the new regime may be claimed, not just for those existing assets which previously qualified for CG roll-over relief, but for all disposals of existing assets which fall within the CG rules. The detailed provisions are described in the section of the manual starting at CIRD20000.