Capital allowances for intangible assets
A company may claim capital allowances for capital expenditure. This must be incurred on specified intangible assets against the income from ‘relevant activities’ of a company. Examples of specified intangible assets include patents, copyrights, trademarks and know-how.
Part 9 of the Corporation Tax manual has a full list of the specific intangible assets included in the scheme.
‘Relevant activities’ include the:
- managing, developing and exploiting of specified intangible assets
- sales deriving the greater part of their value from the use of specified intangible assets.
Revenue treats these activities as a separate ‘relevant trade’ for the purposes of claiming capital allowances.
We treat intangible assets as plant and machinery for capital allowances purposes. The normal wear and tear rules apply. A company may claim the amount of amortisation and any impairment charged in the Statement of Comprehensive Income in each accounting period.
Alternatively, a company may elect to claim capital allowances over a fixed write-down period of 15 years at:
- 7% per annum of qualifying expenditure
- 2% in the final year.
Finance Act 2017 introduced a cap on the amount of relief that may be claimed in an accounting period. This cap applies to claims in respect of capital expenditure on specified intangible assets on or after 11 October 2017. The level of deduction cannot exceed 80% of the trading income of the relevant trade for the accounting period.