Changes to restriction rules on corporation tax relief released

HMRC has finally published guidance for businesses and tax agents about changes to the restriction rules on corporation tax relief for some acquisitions of goodwill and relevant assets, which came into force on 1 April 2019

As a result, businesses can now get relief on purchases made on or after 1 April 2019 if the goodwill and relevant assets are purchased when buying a business with qualifying intellectual property (IP); if the business is liable to corporation tax; and if the relevant assets (including goodwill) are included in the company accounts.

Relief is a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or six times the cost of any qualifying IP assets in the business purchased. It is given yearly until the limit is reached.

To claim, businesses must complete a company tax return and include the relief. This will reduce both the company or organisation’s taxable profit, and the amount of corporation tax to be paid.

Restrictions still apply to goodwill and relevant assets purchased without qualifying IP, or without a business, from a related individual, firm or partnership which are internally-generated, or from a related party that has been subject to a previous restriction.

HMRC Guidance: Corporation Tax relief on goodwill and relevant assets

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