CIRD44070 - Intangible assets: Restrictions for goodwill and relevant assets: Nature of full restriction

This page focuses on the nature of the full restriction which is provided by

  • CTA09/S879C â€� in relation to pre-FA 2019 relevant assets
  • CTA09S879I â€� in relation to acquisitions of relevant asset acquired where no business is acquired and/or no qualifying IP is acquired, and
  • CTA09/S879K â€� in relation to acquisitions from a related individual, or firm, where the third party acquisition condition is not met.

»Ê¹ÚÌåÓýapp full restriction prohibits all debit relief under CTA09/PART8/CHAPTER3. It applies in a similar way to the previous disallowance provided by CTA09/S816A (see CIRD44200). »Ê¹ÚÌåÓýapp prohibition now also extends to cover CTA09/PART8/CHAPTER15. This extension prevents debit relief arising from an adjustment on a change of accounting policy.

Accounting and fixed rate debit restrictions

No debit relief under CTA09/PART 8/CHAPTER3 and CHAPTER15 is allowed in relation to relevant assets. For example, no debit relief is allowed under the following provisions:

  • CTA09/S728 “Expenditure written off as it is incurredâ€�
  • CTA09/S729 “Writing down on an accounting basisâ€�
  • CTA09/S730 “Writing down at a fixed rateâ€�
  • CTA09/S732 “Reversal of previous accounting gainâ€�
  • CTA09/S872 “Adjustments in respect of change [of accounting policy]â€�

This means that costs cannot be relieved at the time the expenditure is incurred or recognised for accounting purposes. »Ê¹ÚÌåÓýappse costs will instead be relieved at the point of realisation by deducting the tax cost from the proceeds of realisation in accordance with the rules in CTA09/PART8/CHAPTER4 (see CIRD13200 onwards).

Debits on realisation of relevant asset

»Ê¹ÚÌåÓýappre is a further restriction where a debit (loss) arises on realisation. Any debit arising on realisation is treated as a non-trading debit. This condition limits how that debit can be utilised by the company (see below).

»Ê¹ÚÌåÓýapp statutory references for this restriction are at:

  • CTA09/S879C(3) - in relation to pre-FA 2019 relevant assets
  • CTA09/S879I(4) - in relation to acquisitions of relevant asset acquired where no business is acquired and/or no qualifying IP is acquired, and
  • CTA09/S879K(5) - in relation to acquisitions from a related individual or firm where the third party condition is not met.

Treatment of non-trading debits

Non-trading debits and credits are brought into the CT computation in a way broadly similar to that adopted by the loan relationship rules. This means that the non-trading debit arising from a realisation of a relevant asset is first aggregated with other non-trading IFA debits and credits. If the result is negative there is a non-trading loss. »Ê¹ÚÌåÓýapp company may then:

  • Set off the loss against the company’s total profits for that accounting period (CIRD13540),
  • Surrender it as group relief (CIRD13550), and
  • In so far as the loss is not dealt with by one or more of the above methods, it is automatically carried forward as a non-trading loss to the next accounting period.

»Ê¹ÚÌåÓýapp effect of treating a debit arising from the realisation of a relevant asset as a non-trading loss, as opposed to a trading debit, is that the company cannot include the debit when calculating trading losses. In particular this means the company cannot carry the non-trading loss back to set off against profits of previous accounting periods.

For more details about how the rules operate in relation to non-trading debits see CIRD13530 onwards.