Amortisation of intangible assets is generally allowable for UK corporation tax, provided the asset falls within Part 8 of the Corporation Tax Act 2009. Whatever a company writes down in its accounts for a qualifying intangible normally flows straight through as a deduction against taxable profits. The main things that break this rule are certain pre-2002 acquisitions, goodwill bought without qualifying intellectual property alongside it, and a defined list of excluded asset categories.
How the Deduction Actually Works
Part 8 treats qualifying intangibles as income items rather than capital ones. When your accountants debit the profit and loss account for the cost of a patent, software licence, or trademark being consumed over its useful life, that same debit reduces your corporation tax bill.1GOV.UK. Corporate Intangibles Research and Development Manual – CIRD10110 The rule covers amortisation charges, impairment losses, and other write-downs recognised under UK GAAP or IFRS.
The system runs both ways. Receipts from intangibles, including royalties, licence fees, and disposal profits, go through the corporation tax computation as income rather than capital gains. HMRC can adjust figures where the accounting treatment doesn’t reflect commercial reality, but for most companies the audited accounts drive the tax result.1GOV.UK. Corporate Intangibles Research and Development Manual – CIRD10110
The 4% Fixed-Rate Election
Some intangibles are given very long useful lives in the accounts, or aren’t amortised at all. A trademark carried at an indefinite life produces no amortisation debit, so the accounts-led route yields nothing.
Section 730 of the Corporation Tax Act 2009 offers a way round this. A company can elect for a fixed write-down of 4% of the asset’s cost each year on a straight-line basis.2GOV.UK. Corporate Intangibles Research and Development Manual – CIRD12905 Shorter accounting periods reduce the amount proportionally, and the annual deduction is capped at the remaining tax written-down value so the asset can’t drop below zero.
The election has to be made in writing within two years of the end of the accounting period in which the company acquired or created the asset, and it’s irrevocable once made.2GOV.UK. Corporate Intangibles Research and Development Manual – CIRD12905 Miss the window and you’re locked into whatever the accounts show.
When the Acquisition Date Blocks Relief
Part 8 originally applied only to intangibles created or acquired on or after 1 April 2002. Anything held before that date was grandfathered out and stayed under the old capital gains rules, meaning no annual amortisation deduction and relief only on eventual sale.3GOV.UK. Corporate Intangibles Research and Development Manual – CIRD10140
The Finance Act 2020 narrowed this cut-off considerably. From 1 July 2020, intangibles acquired by a company come within Part 8 regardless of when the asset was originally created. Buy a pre-2002 patent from an unrelated third party today and you can claim amortisation on it.4Legislation.gov.uk. Finance Act 2020 – Section 31
An anti-avoidance rule sits alongside this. Assets purchased from related parties before 1 July 2020 stay outside Part 8 if the related party had held the asset before 1 April 2002. That stops groups from shuffling old assets between members to unlock deductions Parliament didn’t intend.3GOV.UK. Corporate Intangibles Research and Development Manual – CIRD10140
One important limit: if the company already held a pre-FA 2002 asset before 1 July 2020 and still holds it, the de-grandfathering doesn’t automatically bring it into Part 8. The change mainly helps buyers acquiring old assets after that date.
Goodwill and Customer-Related Intangibles
Goodwill has been treated differently at different times. Between 2002 and mid-2015, purchased goodwill was amortisable under Part 8 in the usual way. The Finance Act 2015 then removed relief entirely for goodwill acquired on or after 8 July 2015, and the same restriction hit customer-related intangibles like client lists and customer relationships.5GOV.UK. Restriction of Corporation Tax Relief for Business Goodwill Amortisation Amortisation had to be added back in the tax computation.
From 1 April 2019, a partial fix restored some relief. Companies can claim a fixed 6.5% annual deduction on “relevant assets,” a category that includes goodwill, customer information, customer relationships, unregistered trademarks, and related licences.6GOV.UK. Corporate Intangibles Research and Development Manual – CIRD44060 Relief only applies where qualifying intellectual property is acquired as part of the same business purchase.7GOV.UK. Corporation Tax Relief on Goodwill and Relevant Assets Qualifying IP means patents, registered designs, copyright, design rights, plant breeders’ rights, and equivalent foreign rights or licences over them.
There’s a cap. The 6.5% runs on the lower of the relevant asset’s cost or six times the cost of the qualifying IP acquired with it.7GOV.UK. Corporation Tax Relief on Goodwill and Relevant Assets Pay £1 million for goodwill and £100,000 for qualifying IP, and the relievable amount is £600,000. Accurate purchase-price allocation across goodwill, customer intangibles, and IP drives the whole tax outcome.
Assets That Never Qualify
Some intangibles fall outside Part 8 completely, no matter when acquired or how they sit in the accounts. No amortisation deduction is available for these under the intangible fixed assets rules:8Legislation.gov.uk. Corporation Tax Act 2009 – Part 8
- Rights over land and rights relating to physical movable property, even where the interest appears as an intangible in the accounts.
- Loan relationships, derivative contracts, insurance policies, and rights under collective investment schemes, all of which have their own corporation tax regimes.
- Oil licences and any goodwill or intangible connected with an oil licence.
- Shares, partnership interests, and rights under trusts.
- Anything held for a non-commercial purpose, or for activities outside the charge to corporation tax.
- Assets on which the company previously claimed capital allowances as tangible items; reclassification doesn’t open the door to amortisation deductions.
- Intangibles used in a separate film, television, video game, or other creative production trade that already qualifies for its own tax relief.
Each category is excluded because a dedicated regime already applies elsewhere in the legislation. Part 8 covers intellectual property, brand assets, software, and similar operational intangibles, and stops well short of every intangible that might appear on a balance sheet.
What Happens on Disposal
Because Part 8 treats intangibles as income items, selling one produces a taxable credit rather than a capital gain. The credit is the proceeds less the tax written-down value (original cost less amortisation and other write-downs already deducted), and it’s taxed as trading income at the company’s corporation tax rate.
Rollover relief under Chapter 7 of Part 8 lets a company defer that credit by reinvesting in another intangible. The old asset must have been a chargeable intangible throughout the holding period, the proceeds must exceed cost, and the replacement spend must fall within a window beginning 12 months before the disposal and ending three years after it.8Legislation.gov.uk. Corporation Tax Act 2009 – Part 8 The replacement expenditure has to be capitalised in the accounts, and the new asset must be a chargeable intangible immediately on acquisition. The claim itself has to be made within two years of the end of the accounting period in which either the reinvestment or the disposal occurred, whichever is later.
Relief works by deducting the deferred gain from the tax cost of the new asset. That reduces future amortisation deductions on it, or increases the taxable credit if it’s later sold without further reinvestment. The tax isn’t cancelled, just postponed.