Corporation Tax Act 2009 section 879O

The partial restrictions on debits

Section 879O sets out how tax relief debits for certain intangible fixed assets (such as goodwill) are partially restricted when a company's expenditure on those assets exceeds specified thresholds linked to qualifying IP expenditure or prior third-party acquisitions.

• Debits for amortisation or accounting-policy changes are reduced by multiplying the full debit by a fraction called the "relevant amount"
• Debits arising on disposal of an asset are split into a reduced trading debit and a separate non-trading debit representing the disallowed portion
• The relevant amount depends on whether the restriction is triggered by the qualifying IP test, the individual/firm acquisition test, or both — if both apply, the two fractions are multiplied together
• The practical effect is to cap the expenditure eligible for full relief at six times the company's qualifying IP spend, and/or by reference to the notional accounting value of relevant assets previously bought from unconnected third parties