Capital allowances for intangible assets

A company may claim capital allowances for capital expenditure 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.

See Part 9 of the Corporation Tax manual for a full list of the specific intangible assets included in the scheme.

“Relevant activities” includes the managing, developing and exploiting of specified intangible assets or the sales deriving the greater part of their value from the use of specified intangible assets. These activities are treated as a separate “relevant trade” for the purposes of claiming capital allowances.

Intangible assets are treated as plant and machinery for capital allowances purposes. The normal wear and tear rules apply. A company may claim capital allowances over a fixed write-down period of 15 years at an annual rate of 7% of qualifying expenditure and 2% in the final year. Alternatively, a company may claim the amount of depreciation or amortization or impairment charged in the Statement of Comprehensive Income in each accounting period.

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.