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Capital Allowances for Intangible Assets

Posted on: Sunday, May 31, 2015

Capital Allowances for Intangible Assets is another area that seems to be cropping up in CAP 2 Tax exams.

When answering a question, what is the Examiner looking for?

  1. Firstly you should tell the Examiner that Capital allowances may be claimed on intangible assets used for the purpose of the trade.
  2. Secondly you should list the specified assets such as patents, registered designs, trademarks, brands, copyrights, domain names, know-how and the related goodwill.
  3. Thirdly, state that the relief applies to intangible assets recognised in accordance with Irish GAAP or IFRS
  4. The options to claim writing down allowances are (a) a claim based on accounting treatment of intangible asset or (b) a fixed write down period of 15 years - 7% per annum plus 2% in final year.

Other important points to remember: 
  1. There is no clawback provided the 15 year life is exceeded.
  2. A separate trade is deemed to arise from managing, developing or exploiting the intangible assets and the relief is ring-fenced to that trade.
  3. The interest cost of funding the acquisition of the intangible assets, including interest on borrowings to invest in a company which uses the money to acquire intangible assets can only be relieved against the income of the separate trade.
  4. Carry forward of excess allowances and interest is permitted.
  5. There is no clawback of the relief where the assets are sold more than 5 years after the beginning of the accounting period in which the asset was first provided.



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