background image
6.5.2. Royalties

A special regime applies to intangible assets, such as patent rights, know-how, and trademarks, and including goodwill. Royalties are generally deductible on an accounts basis, and, except in relation to 'grandfathered' assets owned by the group on 31 March 2002, the accounts' amortisation of intangible assets is also deductible (with an option to take a flat 4% deduction even if not amortised in the accounts). Traders will take the deductions in computing trading income; non-traders will create a 'non-trading loss on intangible fixed assets' that can be relieved as a loss against any profits of the year, carried back one year, or carried forward indefinitely. Effective 8 July 2015, acquisition cost of goodwill is no longer allowed as a tax deduction.

Income costs relating to R&D are normally deductible in any event, but there is a special incentive connected with R&D that generally allows an additional deduction.