Companies get corporation tax relief for goodwill, intellectual property and other intangible fixed assets under Part 8 of the Corporation Tax Act 2009, which treats both the write down and the eventual sale as income items rather than capital. Relief usually follows the amortisation in the accounts, but goodwill and customer related assets bought since 1 April 2019 are relieved at a fixed 6.5% a year and only when acquired with qualifying intellectual property.

Which assets come within the intangibles regime?

The regime covers intangible fixed assets, meaning intangible assets acquired or created by the company for use on a continuing basis in the course of its activities (CTA 2009 s713). That takes in patents, registered designs, copyright, trade marks, licences, know how, customer lists and goodwill. HMRC points out in CIRD11170 that assets which are simply held and then used up, such as carbon credits or exchange tokens, may not meet the “fixed” test even if the accounts call them intangibles.

Timing also counts. Goodwill and other intangibles created before 1 April 2002, or acquired from a related party before 1 July 2020 where the asset was older than that, sit outside Part 8 and stay in the chargeable gains regime. For goodwill the rule is strict: under s884 it is treated as created before 1 April 2002 if the business was carried on by the company or a related party at any time before that date (CIRD11680). A family business that has traded since the 1990s will usually still have pre 2002 goodwill, even if it has been moved between companies since.

How is relief given while the company owns the asset?

For assets inside the regime, the capital and revenue distinction stops being the question. The deduction follows the accounting treatment: whatever the company properly writes off by amortisation or impairment under UK GAAP is deductible (s729, CIRD12755). If the accounts are prepared under FRS 102, the useful life and impairment rules in Section 18 therefore drive the tax deduction, which is why the accounting work described in intangible assets under FRS 102 feeds straight into the computation.

As an alternative, the company can elect to write the asset down at a fixed 4% of cost a year (s730). This suits durable assets that are amortised slowly or not at all, such as a trade mark with an indefinite life. The election is irrevocable and must be made in writing within two years of the end of the accounting period in which the asset was acquired or created (CIRD12905). Each year’s fixed rate deduction is the lower of the percentage of cost (reduced for a short period) and the tax written down value brought forward (CIRD12910).

Where the asset is used in a trade or a property business, the debits and credits are simply treated as expenses and receipts of that trade or property business (CIRD13520). Where it is held for some other business purpose, for example by an investment company, they are pooled as non trading debits and credits; a net credit is taxed as income and a net loss can be set against total profits, surrendered as group relief or carried forward (CIRD13530).

What are the special rules for goodwill?

Goodwill, customer information, customer relationships, unregistered trade marks and licences of these are “relevant assets” under s879A, and they follow their own rules in Chapter 15A of Part 8 (CIRD44060). For relevant assets acquired on or after 1 April 2019:

  • relief is given only at a fixed 6.5% a year, whatever the accounts show (CIRD44065);
  • relief is available only if the relevant assets were acquired as part of the acquisition of a business that includes qualifying IP assets, broadly patents, registered designs, copyright, design rights and plant breeders’ rights (CIRD44060);
  • relief is capped where the cost of the relevant assets exceeds six times the cost of the qualifying IP acquired with them (CIRD44055).

Trade marks and know how do not count as qualifying IP, and nor does an end user software licence. A trading business bought with no registered rights at all therefore produces goodwill with no annual relief.

Older acquisitions keep the treatment that applied when they were made. Goodwill acquired between 8 July 2015 and 31 March 2019 gets no amortisation relief at all, even if bought from an unrelated party, while goodwill bought from third parties before 3 December 2014 continues to be relieved in line with the accounts (CIRD44055).

What happens when a business incorporates?

Where a sole trader or partnership sells goodwill to a company they are related to, the full restriction in s879K applies unless the transferor originally bought the business from a third party and the company acquires the whole of it (CIRD44083). HMRC expects the restriction to apply to most related party incorporations. The company gets no annual deduction; its cost is only relieved when the goodwill is eventually sold or otherwise realised, and any loss on realisation is a non trading debit that cannot be carried back against earlier trading profits (CIRD44070).

This is a frequent source of disappointment. Advisers sometimes book goodwill at a full valuation on incorporation and credit the director’s loan account, expecting the company to claim the amortisation. The credit can still be drawn as a tax efficient loan repayment, but the company’s tax relief is deferred until sale. The accounting side is covered in recording goodwill on incorporation and the capital gains side for the individual in incorporation relief.

How is a sale of an intangible taxed?

A disposal is a “realisation” under Chapter 4 of Part 8. The proceeds recognised in the accounts, less incidental costs of sale, are compared with the tax written down value, and the difference is a taxable credit or a deductible debit (CIRD13210). Because the regime is an income regime there is no indexation allowance: the credit is taxed as part of trading profit if the asset was used in the trade, and at the company’s normal rate.

A company that sells goodwill or IP can defer the taxable credit by reinvesting in other chargeable intangible assets. Reinvestment relief works like rollover relief: the deferred amount is deducted from the cost of the new asset, reducing future deductions on it (CIRD20010). The new expenditure must be incurred in the period from 12 months before to three years after the realisation (s756, CIRD20110). The part of the credit that simply claws back earlier amortisation deductions cannot be deferred, and relief is restricted if not all the proceeds are reinvested.

How does it work in practice?

Illustration only. Alpha Ltd buys a design business from an unrelated seller on 1 April 2026 for 500,000 pounds. The purchase price is allocated 100,000 pounds to registered patents and designs and 400,000 pounds to goodwill. Alpha amortises the patents over ten years in its accounts.

Asset Basis of relief Annual deduction
Patents and designs (100,000) Follows accounts amortisation 10,000
Goodwill (400,000) Fixed 6.5%; cost is below six times the qualifying IP of 100,000 26,000

If the goodwill had cost 800,000 pounds, only the part up to six times the qualifying IP (600,000 pounds) would attract the 6.5% deduction. If no patents or designs had been acquired, the goodwill would get no annual deduction at all, and relief would wait until it was sold.

How does the regime fit with groups and other reliefs?

Transfers of chargeable intangibles between members of the same group are tax neutral under s775: the transferee takes over the transferor’s tax position and gets no new right to make a fixed rate election (CIRD40220, CIRD12905). If the transferee then leaves the group, a degrouping charge can bring the deferred gain back into charge. Non trading losses on intangibles can be surrendered under the group relief rules (CIRD13530). Companies exploiting patents may also be able to tax the related profits at a lower effective rate through the Patent Box, which runs alongside the deductions described here rather than replacing them.

Pre 2002 assets remain chargeable assets for capital gains purposes, and a gain on selling them can be rolled into new intangibles within Part 8 (CIRD20010). Their gains are computed under the rules explained in capital gains in a company.

What mistakes come up most often?

  • Claiming accounts amortisation on goodwill bought since 1 April 2019 instead of the fixed 6.5%, or claiming relief where no qualifying IP was acquired.
  • Claiming any relief on goodwill acquired on a related party incorporation without checking the third party acquisition condition.
  • Treating goodwill of a long established family business as inside Part 8 when s884 deems it created before April 2002.
  • Missing the two year deadline for the 4% fixed rate election on a long life trade mark.
  • Reporting a sale of IP as a capital gain instead of a taxable credit, or forgetting that reinvestment relief cannot shelter recovered amortisation.

HMRC’s Corporate Intangibles Research and Development Manual, from CIRD10000, sets out the rules in full and is worth reading for any acquisition where goodwill forms a significant part of the price.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.