CIRD44650 | Intangible assets: FA15 and F2A 2015 rules for goodwill and relevant assets: FA15 - computational examples
From HM Revenue & Customs · Corporate Intangibles Research and Development Manual
Examples
The following examples show how to calculate trading and non-trading debits where a company disposes of a relevant asset that includes third party acquisition costs.
In the first example the asset acquired is not subject to a tax cost adjustment. The second example includes a tax cost adjustment e.g. a market value adjustment because the accounting value of the goodwill recognised exceeds the market value.
Example 1
Loss on disposal
Accounting cost of goodwill (CE): £280,000
Tax adjusted cost of Goodwill (E/ECEA): £280,000
Third party acquisition value (RAVTPA): £70,000
AM = RAVTPA/CEA: 0.25
| Year | Accounting debit | Unrestricted debit | S849C(2) debit | Year end accounting value | Year end notional TWDV | Year end actual TWDV |
|---|---|---|---|---|---|---|
| Year 1 | £28,000 | £28,000 | £7,000 | £252,000 | £252,000 | £273,000 |
| Year 2 | £56,000 | £56,000 | £14,000 | £196,000 | £196,000 | £259,000 |
| Year 3 | £56,000 | £56,000 | £14,000 | £140,000 | £140,000 | £245,000 |
Relief under Chapter 4 for disposal in year 4
Sale proceeds: £80,000
Accounting loss: £60,000 (sale proceeds (£80,000) minus AV (£140,000)
Trading debit: £60,000 (D x AM); where D is calculated using notional TWDV
S849C(4): £15,000
Non trading debit: £165,000 (D - TD); where D is calculated using actual TWDV
S849C(5): £150,000
Example 2
Loss on disposal with adjusted tax cost
Accounting cost of goodwill (CE): £400,000
Tax adjusted cost of goodwill (E/CEA): £200,000
Third party acquisition value (RAVTPA): £50,000
AM = RAVTPA/CEA: 0.25
| Year | Accounting debit | Unrestricted debit | S849C(2) debit | Year end accounting value | Year end notional TWDV | Year end actual TWDV |
|---|---|---|---|---|---|---|
| Year 1 | £80,000 | £40,000 | £10,000 | £320,000 | £160,000 | £190,000 |
| Year 2 | £80,000 | £40,000 | £10,000 | £240,000 | £120,000 | £180,000 |
| Year 3 | £80,000 | £40,000 | £10,000 | £160,000 | £80,000 | £170,000 |
Relief under Chapter 4 for disposal in year 4
Sale proceeds: £60,000
Accounting loss: £100,000 (sale proceeds (£60,000) minus AV (£160,000)
Trading debit: £20,000 (D x AM); where D is calculated using notional TWDV
S849C(4): £5,000
Non trading debit: £110,000 (D - TD); where D is calculated using actual TWDV
S849C(5): £105,000