What taxable credit arises when an intangible fixed asset is revalued upwards under section 723 of the Corporation Tax Act 2009?

Under section 723, when an intangible fixed asset is revalued upwards, a taxable credit must be recognised. The credit is the lower of the tax-adjusted increase (calculated by multiplying the accounting increase by the ratio of tax written-down value to accounting value) and the net total of previous tax debits minus credits on that asset.

How is the tax-adjusted increase calculated for a revalued intangible fixed asset?

The tax-adjusted increase is found by multiplying the accounting increase by the ratio of the asset's tax written-down value to its accounting value immediately before the revaluation. For example, if the accounting increase is £100,000 with a tax written-down value of £60,000 against an accounting value of £80,000, the result is £75,000.

What counts as a revaluation under section 723 of the Corporation Tax Act 2009?

Revaluation is broadly defined under section 723. It covers a formal revaluation exercise, the first-time valuation of an asset already on the balance sheet that has never previously been valued, and the restoration of losses that were recognised in earlier accounting periods. All such events may trigger a taxable credit.

Does section 723 apply if a company has elected for fixed-rate writing down under section 730?

No, section 723 does not apply to any intangible fixed asset where the company has made a fixed-rate writing-down election under section 730 of the Corporation Tax Act 2009. Where such an election is in force, the tax treatment of any revaluation of that asset is governed by the separate fixed-rate regime instead.

Corporation Tax Act 2009 section 723

Revaluation

Section 723 deals with the tax credit that must be recognised when an intangible fixed asset is revalued upwards in a company's accounts.

When an intangible fixed asset increases in accounting value on revaluation, a taxable credit must be brought into account
The credit is the lower of two amounts: the tax-adjusted increase (calculated using the ratio of the asset's tax written-down value to its accounting value) and the net total of previous tax debits minus credits on that asset
Revaluation includes the first-time valuation of an asset already on the balance sheet and the restoration of past losses
This section does not apply where the company has elected to use the fixed-rate basis of writing down under section 730

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