Taxation (International and Other Provisions) Act 2010 section 391A

Amounts capitalised in carrying value of intangible fixed assets

Section 391A ensures that when interest or other financing costs are capitalised within the carrying value of an intangible fixed asset, any subsequent tax deduction arising from the write-off of that asset remains within the scope of the corporate interest restriction rules.

• Where interest or financing costs are capitalised in the carrying value of an intangible fixed asset, any related tax deduction on write-off must be included in tax-interest calculations.
• The intangible fixed asset priority rule in CTA 2009 section 906(1) is disapplied so that it cannot override the loan relationship or derivative contract rules when determining tax-interest amounts.
• Without this provision, the exclusivity rule for intangible fixed assets could prevent financing costs embedded in those assets from being captured by the corporate interest restriction regime.
• This brings the treatment of financing costs capitalised in intangible fixed assets into line with the treatment of financing costs capitalised in trading stock.