Original proposals offered tax relief by allowing companies to depreciate intellectual property and goodwill.
But the extra measures in the proposed legislation, described as ‘radical’ by one tax expert, will also allow rollover relief on the profits made from the disposal of intangible assets.
The relief can be earned as long as the profits from the sale of intangibles are reinvested in other intangible assets. More radically, the relief can also be earned by rolling over profits into the shares of a company holding intangible assets.
Lindsay Dodsworth, a tax partner at Ernst and Young, said: ‘It’s extremely useful.
‘What this means is that there will be no disadvantages to buying shares, as there were before.’ The big winners from the measures will be biotech companies, pharmaceutical companies like GlaxoSmithKline and software developers.
Those businesses owning licences, patents, company names and brands will also see distinct advantages in the proposed measures.
Dodsworth believes the measures may make it much more attractive for companies to develop intangible assets, but sees the measure as putting those dealing in such assets on a level playing field with other business sectors.
Currently the sale of an intangible asset is only seen as a taxable gain that attracts no tax relief in the same way as capital gains tax.
Rollover relief for intangibles will operate much the same way as CGT so that it will be available for one year before and three years after the disposal of an asset.
However, the proposals for buying shares means the asset in the acquired company may be outside the current CGT limits yet still attract the relief.
But there was disappointment last week as the proposals failed to appear in the Finance Bill 2001 leaving observers wondering when the proposals would be introduced by the government.
A delay is bound to raise disappointment among those who have been participating in consultations on the issue for the past two years.
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