Capital allowances for intangible assets

A company may claim capital allowances for capital expenditure incurred on specified intangible assets against its income from ‘relevant activities’. Examples of specified intangible assets include patents, copyrights, trademarks and know-how.

Appendix 1 of Tax and Duty Manual Captial allowances for intangible assests has a full list of the specified intangible assets included in the scheme.

‘Relevant activities’ include:

• the managing, developing and exploiting of specified intangible assets
• and
• 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.

Specified intangible assets are treated as plant and machinery for capital allowances purposes. 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
• and
• 2% in the final year.

The 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.