The Finance Act 2015 and proposals in the Finance Bill restrict the tax relief which your company clients may claim in respect of goodwill and certain other customer-related intangible fixed assets. What are the new rules and what action do you need to take?


Measures which were introduced in December 2014 restrict when and how corporation tax relief is allowed in relation to internally-generated goodwill and certain other customer-related intangible assets acquired from connected parties. The new Finance Bill (following the Summer Budget) is set to replace these measures completely.

The existing restrictions apply to goodwill and other relevant assets acquired, on incorporation of a pre-existing business or otherwise, from 3 December 2014 onwards.

The only exception is where the assets were acquired under an unconditional contractual obligation made before that date. The legislation specifies that it applies to acquisitions made directly or indirectly from such related parties from 24 March 2015 onwards unless acquired under an unconditional contractual obligation made before that date (ss.746(2)(ba) , 849B–849D CTA 2009 , as inserted by s.26 FA 2015) .

Pro advice. HMRC may contend that, even before 24 March 2015, the restrictions apply equally to direct and indirect acquisitions.


In addition to goodwill, other relevant assets for these purposes include (broadly) intangibles consisting of:

  • information relating to customers, or potential customers of the transferor
  • intangibles consisting of relationships with such customers or potential customers
  • unregistered trademarks or other signs used by the transferor
  • licences or other rights in respect of such assets ( s.849B(2) CTA 2009 ).

In checking whether the restrictions apply, you have to consider whether or not the transferor had acquired the relevant assets from an unrelated third party.


Where the restrictions don’t apply, the transferee company is allowed to claim relief for a proportion of certain debits. These include amortisation and impairment debits that would otherwise have applied under the old (pre- FA 2015 ) rules, provided they were calculated in accordance with GAAP.

In these circumstances the allowable trading debits are D x AM, where D is the amount of the debit that would otherwise have applied, and AM (the appropriate multiplier) is the lesser of 1 and RAVTPA ÷ CEA. RAVTPA is the relevant accounting value of third party acquisitions, and CEA is the expenditure incurred on acquisition of the relevant assets (ss.849C(4) & (6) CTA 2009) .

When the relevant assets are sold, a non-trading debit is recognised equal to D – TD, where D is the amount of the debits that would otherwise have been brought into account and TD is the amount of the trading debits already allowed (ss.849C(5) & (6) CTA 2009) .

Pro advice. An acquisition is not treated as a third party acquisition if its main purpose, or one of its main purposes, is for any person to obtain a tax advantage (s.849B(9) CTA 2009) .


For all other relevant acquisitions on or after 3 December 2014, i.e. those that are not acquired third party assets, no relief is allowed under the intangible fixed assets regime until disposal of the asset. At that point a non-trading debit is recognised, equal to the trading debit that would otherwise have arisen under the old rules ( s.849D CTA 2009 ).

Example 1. On 1 January 2010 QRS, a partnership of individuals, acquired the business and goodwill of P Ltd, a company to whom none of those individuals was a related party. On 1 January 2015 S Ltd, a company related to one of the partners (S), acquired the business and goodwill of QRS. S Ltd has acquired goodwill directly from a related party on or after 3 December 2014, so its trading debits in respect of amortisation, impairment etc. will be restricted. A proportion of the amortisation referable to its acquired third party goodwill (from P Ltd) will be allowed as trading debits. No debits will be allowed in respect of the rest of the goodwill until eventual realisation, at which point only a non-trading debit will emerge.


The new Finance Bill (see Follow up ) replaces these restrictions wholesale and takes matters much further. There is now no relief in respect of all goodwill and other relevant assets (as defined above), unless acquired before 8 July 2015.

Again there is an exception for unconditional contractual obligations made before that date, subject to transitional provisions for accounting periods straddling 8 July 2015. The draft legislation is available as part of the HMRC documents published after the Summer Budget (see Follow up ).

The old provisions are replaced by s.816A CTA 2009 , which will provide (subject to Royal Assent) that no corporation tax deductions are allowed at all in respect of debits discussed above – even if acquired from an unrelated party.

The Finance Bill also amends the treatment of any loss arising on the disposal of any such goodwill and other relevant assets, so that it is deemed to be a non-trading debit arising on disposal.

Example 2. On 1 July 2015 X Ltd acquired goodwill from an unrelated third party at a cost of £100,000. Because the acquisition is from an unrelated party before 8 July 2015, it is unaffected by the FA 2015 changes or the Finance Bill proposals. Under FRS 102 the company decides to amortise the cost on a straight line basis over ten years. The resulting debits will be allowed as trading debits under the intangible fixed assets regime. On 1 August 2015 Y Ltd acquired goodwill from an unrelated third party at a cost of £100,000. Following Royal Assent to the Finance Bill , Y Ltd will be unable to claim any debits in respect of amortisation, impairment, etc. because it acquired the goodwill on or after 8 July 2015. However, if and when the company disposes of the goodwill, it will be entitled to claim a non-trading debit on realisation.


The Finance Bill measures do not impose any restrictions in respect of intangible assets apart from goodwill and the other specified relevant assets. Investment expenditure on intellectual property and other intangible assets will continue to qualify for relief under the intangible fixed assets regime.

Your company clients have been accustomed to obtaining corporation tax relief when expenditure on goodwill and intangible assets is recognised in the accounts.

This relief has been available to companies acquiring a business directly by purchasing its trade and assets, but not to those acquiring shares. The Finance Bill removes this incentive to companies to buy assets rather than shares and helps create a more level playing field.

Pro advice. The dates of transactions need to be carefully noted. The complex, ongoing restrictions on acquisitions from related parties came into effect on 3 December 2014, or perhaps 24 March 2015 in some cases. The much wider restriction proposed by the Finance Bill will take effect from 8 July 2015, subject to Royal Assent.

The changes may well mean that there is little difference between a trade and asset purchase, and a share purchase, at least from the purchasing company’s viewpoint. This could well change the approach your client might adopt when selling or purchasing a business.

Follow up

New Finance Bill

Draft legislation

Corporation tax relief is no longer available where a company acquires goodwill or certain other customer-related intangibles. Inform any clients considering selling or buying a business – it may affect their negotiations in relation to a purchase or sale price, or even the method of purchase or sale.